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Photo of Rafael M. Di Tella

Unit: Business, Government and the International Economy

Contact:

(617) 495-5048

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Areas of Interest

  • corruption
  • crime
  • happiness
  • political economy
  • welfare state

Additional Topics

  • economic institutions
  • emotions
  • ethics
  • macroeconomics
  • privatization
  • values

Industries

  • broadcasting
  • state government

Geographies

  • Eastern Europe
  • Europe
  • North America
  • Peru
  • South America
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Rafael M. Di Tella

William Ziegler Professor of Business Administration

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I received my first degree in Economics in 1990 from the Universidad de Buenos Aires, Argentina and a D.Phil in Economics from Oxford University in 1996. After a short stay in Argentina I joined Harvard Business School in July 1997, where I have taught Business History and courses on the business environment in the first year required curriculum, as well as an elective course on Institutions and Macroeconomics in the second year.

I work on political economy, with a focus on institutional development. One strand of work studies measures of happiness and how they can inform government policies on issues that range from the incidence of inequality to the inflation-unemployment tradeoff. Another part of my research has concerned itself with the causes of illegal behavior, with applications to corruption and crime. Two recent examples include a paper on media bias and government transfers, and another trying to figure out if offenders released from electronic monitoring have lower recidvism rates than those released from prison.  Finally, an increasingly important area of research for me has focused on the role of beliefs in economic organization, including reversals of pro-market reform and, more generally, why doesn't capitalism flow to poor countries. My work has been published mainly in academic journals.

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Publications

Recent Working Papers

  1. Working Paper | HBS Working Paper Series | 2019

    Comments on Macri's Macro by Federico Sturzenegger

    Rafael Di Tella

    Citation:

    Di Tella, Rafael. "Comments on Macri's Macro by Federico Sturzenegger." Harvard Business School Working Paper, No. 20-025, September 2019. (Revised October 2019. Spanish version. Version en Castellano. Comentarios Sobre "La Macroeconomia de Macri" de Federico Sturzenegger.)  View Details
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  2. Working Paper | HBS Working Paper Series | 2019

    Persuasive Propaganda During the 2015 Argentine Ballotage

    Rafael Di Tella, Sebastian Galiani and Ernesto Schargrodsky

    We study a propaganda campaign sponsored by the government against the main political challenger in the days preceding the 2015 Argentine runoff presidential election. Subjects in the treatment group watched an “ad” initially aired during soccer transmissions that was part of this campaign and were then asked about their political views. Relative to subjects in the control group, their declared preference for the challenger drops by 6.5 percentage points. We find no effects of the three types of defenses employed by the challenger (a positive message unrelated to the “ad”, an answer to the accusations in the “ad”, and a counter-attack). The propaganda effect is driven by women.

    Keywords: propaganda; persuasion; voting; Voting; Political Elections; Government and Politics; Communication Strategy; Power and Influence; Public Opinion; Argentina;

    Citation:

    Di Tella, Rafael, Sebastian Galiani, and Ernesto Schargrodsky. "Persuasive Propaganda During the 2015 Argentine Ballotage." Harvard Business School Working Paper, No. 20-030, September 2019. (Revised November 2019.)  View Details
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Best Known Case

  1. Case | HBS Case Collection | October 2014 (Revised February 2017)

    A Currency We Can Call Our Own: Populism, Banking Crises, and Exchange Rate Crises in Argentina, 1946–2002

    Rafael Di Tella

    The case describes Argentina's struggle to establish a credible monetary system under populist pressures and the recurrent use of exchange rate stabilization plans. It focuses on two episodes where there was "too little money" in the economy: during the hyperinflation episodes during the late 1980's—when money demand collapsed and the early 2000's when the supply of money collapsed under a hard currency peg.

    Keywords: Debt crisis; hyperinflation; financial crisis; Inflation and Deflation; Currency Exchange Rate; Argentina;

    Citation:

    Di Tella, Rafael. "A Currency We Can Call Our Own: Populism, Banking Crises, and Exchange Rate Crises in Argentina, 1946–2002." Harvard Business School Case 715-019, October 2014. (Revised February 2017.)  View Details
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Most Recent Case

  1. Case | HBS Case Collection | March 2019

    Brazil's Messi(as)? The Lava Jato Corruption Scandal, the Recession, and the Rise of Bolsonaro

    Rafael Di Tella and Jose Liberti

    Citation:

    Di Tella, Rafael, and Jose Liberti. "Brazil's Messi(as)? The Lava Jato Corruption Scandal, the Recession, and the Rise of Bolsonaro." Harvard Business School Case 719-069, March 2019.  View Details
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Corruption and Crime

  1. Article | Journal of Economic Behavior & Organization

    Crime and Violence: Desensitization in Victims to Watching Criminal Events

    Rafael Di Tella, Lucia Freira, Ramiro H. Gálvez, Ernesto Schargrodsky, Diego Shalom and Mariano Sigman

    We study desensitization to crime in a lab experiment by showing footage of criminal acts to a group of subjects, some of whom have been previously victimized. We measure biolog­ical markers of stress and behavioral indices of cognitive control before and after treated participants watch a series of real, crime-related videos (while the control group watches non-crime-related videos). Not previously victimized participants exposed to the treat­ment video show significant changes in cortisol level, heart rate. and measures of cognitive control. Instead, previously victimized individuals who are exposed to the treatment video show biological markers and cognitive performance comparable to those measured in indi­viduals exposed to the control video. These results suggest a phenomenon of desensitization or habituation of victims to crime exposure.

    Keywords: crime; biological markers; Experiment; victimization; desensitization; Crime and Corruption; Behavior;

    Citation:

    Di Tella, Rafael, Lucia Freira, Ramiro H. Gálvez, Ernesto Schargrodsky, Diego Shalom, and Mariano Sigman. "Crime and Violence: Desensitization in Victims to Watching Criminal Events." Journal of Economic Behavior & Organization 159 (March 2019): 613–625.  View Details
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  2. Article | Journal of Comparative Economics

    Populism and the Return of the 'Paranoid Style': Some Evidence and a Simple Model of Demand for Incompetence as Insurance against Elite Betrayal

    Rafael Di Tella and Julio J. Rotemberg

    We present a simple model of populism as the rejection of “disloyal” leaders. We show that adding the assumption that people are worse off when they experience low income as a result of leader betrayal (than when it is the result of bad luck) to a simple voter choice model yields a preference for incompetent leaders even if all leaders have the same underlying probability of betrayal. These deliver worse material outcomes in general, but they reduce the feelings of betrayal during bad times. Some evidence consistent with our model is gathered from the Trump-Clinton 2016 election: on average, subjects primed with the importance of competence in policymaking decrease their support for Trump, the candidate who scores lower on competence in our survey (even amongst Trump supporters). But two groups respond to the treatment with a large (approximately 5 percentage points) increase in their support for Donald Trump: those living in rural areas and those that are low educated, white and living in urban and suburban areas.

    Keywords: populism; corruption; betrayal; incompetence; Voting; Attitudes;

    Citation:

    Di Tella, Rafael, and Julio J. Rotemberg. "Populism and the Return of the 'Paranoid Style': Some Evidence and a Simple Model of Demand for Incompetence as Insurance against Elite Betrayal." Journal of Comparative Economics 46, no. 4 (December 2018): 988–1005.  View Details
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  3. Article | American Economic Review

    Conveniently Upset: Avoiding Altruism by Distorting Beliefs About Others' Altruism

    Rafael Di Tella, Ricardo Perez-Truglia, Andres Babino and Mariano Sigman

    We present results from a “corruption game” (a dictator game modified so that recipients can take a side payment in exchange for accepting a reduction in the overall size of the pie). Dictators (silently) treated to be able to take more of the recipient’s tokens, took more of them. They were also more likely to believe that recipients had accepted side payments, even if there was a prize for accuracy. The results favor the hypothesis that people avoid altruistic actions by distorting beliefs about others’ altruism.

    Keywords: convenient beliefs; cognitive dissonance; Values and Beliefs; Behavior; Cognition and Thinking;

    Citation:

    Di Tella, Rafael, Ricardo Perez-Truglia, Andres Babino, and Mariano Sigman. "Conveniently Upset: Avoiding Altruism by Distorting Beliefs About Others' Altruism." American Economic Review 105, no. 11 (November 2015): 3416–3442.  View Details
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  4. Article | Journal of Political Economy

    Criminal Recidivism after Prison and Electronic Monitoring

    Rafael Di Tella and Ernesto Schargrodsky

    We study criminal recidivism in Argentina by focusing on the re-arrest rates of two groups: individuals released from prison and individuals released from electronic monitoring. Detainees are randomly assigned to judges, and ideological differences across judges translate into large differences in the allocation of electronic monitoring to an otherwise similar population. Using these peculiarities of the Argentine setting we argue that there is a large, negative causal effect on criminal recidivism of treating individuals with electronic monitoring relative to prison.

    Keywords: crime; prison; recidivism; Behavior; Situation or Environment; Crime and Corruption; Argentina;

    Citation:

    Di Tella, Rafael, and Ernesto Schargrodsky. "Criminal Recidivism after Prison and Electronic Monitoring." Journal of Political Economy 121, no. 1 (February 2013): 28–73.  View Details
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  5. Article | American Economic Journal: Applied Economics

    Government Advertising and Media Coverage of Corruption Scandals

    Rafael Di Tella and Ignacio Franceschelli

    We construct measures of the extent to which the four main newspapers in Argentina report government corruption in their front page during the period 1998-2007 and correlate them with government advertising. The correlation is negative. The size is considerable: a one standard deviation increase in monthly government advertising is associated with a reduction in the coverage of the government's corruption scandals by 0.23 of a front page per month, or 18% of a standard deviation in coverage. The results are robust to the inclusion of newspaper, month, newspaper president, and individual-corruption scandal fixed effects as well as newspaper-president specific time trends.

    Keywords: Crime and Corruption; Advertising; Government and Politics; Newspapers; Media; Argentina;

    Citation:

    Di Tella, Rafael, and Ignacio Franceschelli. "Government Advertising and Media Coverage of Corruption Scandals." American Economic Journal: Applied Economics 3, no. 4 (October 2011): 119–151.  View Details
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  6. Article | Brookings Papers on Economic Activity

    Why Doesn't Capitalism Flow to Poor Countries?

    Rafael Di Tella and Robert MacCulloch

    We show that capitalism is far from common around the world. Outside a small group of rich countries, heavy regulation of business, leftist rhetoric, and interventionist beliefs flourish. We relate these phenomena to the presence of corruption, with causality running in both directions. The paper presents evidence that, within a country, those who perceive widespread corruption also tend to demand more regulation. As regulation is held constant within a country, this finding is hard to explain if one assumes that causality runs only from regulation to corruption. We also find that over time, increases in corruption in a country precede increases in left-wing voting. To explain our findings, we present a model where corrupt capitalists are disliked, and voting for left-wing policies is a form of punishment available to voters even in weak judicial systems. Evidence on emotions supports this explanation: the frequency with which people report experiencing anger is positively correlated with perceived corruption, but this relationship is significantly weaker when business is heavily regulated.

    Keywords: Crime and Corruption; Voting; Economic Systems; Fairness; Governing Rules, Regulations, and Reforms; Emotions;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "Why Doesn't Capitalism Flow to Poor Countries?" Brookings Papers on Economic Activity (Spring 2009): 285–321.  View Details
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  7. Article | Economic Journal (Royal Economic Society)

    Choosing Agents and Monitoring Consumption: A Note on Wealth as a Corruption-Controlling-Device

    Rafael Di Tella and Federico Weinschelbaum

    Keywords: Wealth; Crime and Corruption;

    Citation:

    Di Tella, Rafael, and Federico Weinschelbaum. "Choosing Agents and Monitoring Consumption: A Note on Wealth as a Corruption-Controlling-Device ." Economic Journal (Royal Economic Society) 118, no. 532 (October 2008).  View Details
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  8. Article | Economía

    Cost Reductions, Cost Padding and Stock Market Prices: The Chilean Experience with Price Cap Regulation

    Rafael Di Tella and Alexander Dyck

    Keywords: Cost; Price; Stocks; Markets; Governing Rules, Regulations, and Reforms; Chile;

    Citation:

    Di Tella, Rafael, and Alexander Dyck. "Cost Reductions, Cost Padding and Stock Market Prices: The Chilean Experience with Price Cap Regulation." Economía 8, no. 2 (spring 2008).  View Details
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  9. Article | Journal of Economics & Management Strategy

    Reputation When Threats and Transfers Are Available

    Ernesto Dal Bo, Pedro Dal Bo and Rafael Di Tella

    We present a model where a long-run player is allowed to use both money transfers and threats to influence the decisions of a sequence of short-run players. We show that threats might be used credibly (even in arbitrarily short repeated games) by a long-lived player who gains by developing a reputation of carrying out punishments. Particular cases of the model are a long-lived pressure group offering rewards and punishments to a series of targets (public or corporate officials) in exchange for policy favors, or that of a long-lived extorter who demands money in order not to punish. We use the model to analyze the "convicted nonpayor" debate around judicial corruption. The model highlights formal similarities between lobbying and extortion.

    Keywords: Crime and Corruption; Decision Choices and Conditions; Game Theory; Mathematical Methods; Interests; Power and Influence; Reputation;

    Citation:

    Dal Bo, Ernesto, Pedro Dal Bo, and Rafael Di Tella. "Reputation When Threats and Transfers Are Available." Journal of Economics & Management Strategy 16, no. 3 (Fall 2007).  View Details
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  10. Article | American Political Science Review

    'Plato o Plomo': Bribe and Punishment in a Theory of Political Influence

    Rafael Di Tella, Ernesto Dal Bo and Pedro Dal Bo

    Keywords: Theory; Government and Politics; Crime and Corruption;

    Citation:

    Di Tella, Rafael, Ernesto Dal Bo, and Pedro Dal Bo. "'Plato o Plomo': Bribe and Punishment in a Theory of Political Influence." American Political Science Review 100, no. 1 (February 2006): 41–53.  View Details
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  11. Article | Journal of Law & Economics

    Are Politicians Really Paid Like Bureaucrats?

    Rafael Di Tella and Raymond Fisman

    We provide the first empirical analysis of gubernatorial pay. Using U.S. data for 1950-90, we document substantial variation in the wages of politicians, both across states and overtime. Gubernatorial wages respond to changes in state income per capita and taxes. We estimate that governors receive a 1 percent pay cut fo reach 10 percent increase in per capita tax payments and a 4.5 percent increase in pay for each 10 percent increase in income per capita in their states. There is evidence that the taxelasticity reflects a form of “reward for performance.” The evidence for the income elasticity of pay is less conclusive but is suggestive of “rentextraction” motives. Finally,we find that democratic institutions play an important role in shaping pay. For example,voter initiatives and the presence of political opposition significantly reduce the income elasticity of pay and increase taxelasticities of pay.

    Keywords: Government and Politics; Compensation and Benefits;

    Citation:

    Di Tella, Rafael, and Raymond Fisman. "Are Politicians Really Paid Like Bureaucrats?" Journal of Law & Economics 47, no. 2 (October 2004): 477–514.  View Details
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  12. Article | Economics & Politics

    Inflation, Inflation Variability, and Corruption

    Miguel Braun and Rafael Di Tella

    We present a model where agents can inflate the cost of goods needed to start an investment project and inflation variability increases monitoring costs. We show that inflation variability can lead to higher corruption and lower investment. We document a positive relationship between corruption and inflation variability in a sample of 75 countries. The effect is robust to the inclusion of country fixed effects, other controls, and 2SLS estimation. The results are economically significant: a one standard deviation increase in inflation variance from the median increases corruption by 12 percent of a standard deviation and reduces growth by 0.33 percentage points. Our paper highlights a new channel through which inflation reduces investment and growth, thus bridging the perception gap over the costs of inflation between economists and the public. We also find evidence that political competition reduces corruption and that corruption is pro‐cyclical.

    Keywords: Inflation and Deflation; Crime and Corruption;

    Citation:

    Braun, Miguel, and Rafael Di Tella. "Inflation, Inflation Variability, and Corruption." Economics & Politics 16, no. 1 (March 2004).  View Details
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  13. Article | American Economic Review

    Do Police Reduce Crime? Estimates Using the Allocation of Police Forces after a Terrorist Attack

    Rafael Di Tella and Ernesto Schargrodsky

    An important challenge in the crime literature is to isolate causal effects of police on crime. Following a terrorist attack on the main Jewish center in Buenos Aires, Argentina, in July 1994, all Jewish institutions received police protection. Thus, this hideous event induced a geographical allocation of police forces that can be presumed exogenous in a crime regression. Using data on the location of car thefts before and after the attack, we find a large deterrent effect of observable police on crime. The effect is local, with no appreciable impact outside the narrow area in which the police are deployed.

    Keywords: Law Enforcement; Crime and Corruption; Resource Allocation; National Security;

    Citation:

    Di Tella, Rafael, and Ernesto Schargrodsky. "Do Police Reduce Crime? Estimates Using the Allocation of Police Forces after a Terrorist Attack." American Economic Review 94, no. 1 (March 2004): 115–33.  View Details
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  14. Article | Journal of Political Economy

    Capture by Threat

    Ernesto Dal Bo and Rafael Di Tella

    We analyze a simple stochastic environment in which policy makers can be threatened by “nasty” interest groups. In the absence of these groups, the policy maker’s desire for reelection guarantees that good policies are implemented for every realization of the shock. When pressure groups can harass the policy maker, good policies will be chosen for only a subset of states of nature. Hence, honest and able leaders might implement bad policies, and needed reforms could be delayed. In order to make good policies more likely, the public will want to increase the cost of exerting pressure for “nasty groups” and provide rents to those in power. This last result can be used to explain the existence of political parties. They play a role resembling that of the supervisor in the literature on collusion in hierarchical agency. A rational public may also choose to ignore negative media reports on a politician’s personal life and, in general, elect “strong” political leaders. The prevalence of coercive methods of influence helps explain why countries may get to be governed by “inept politicians.”

    Keywords: political parties; politicians; Nash equilibrium; Political Elections;

    Citation:

    Dal Bo, Ernesto, and Rafael Di Tella. "Capture by Threat." Journal of Political Economy 111, no. 5 (October 2003): 1123–54.  View Details
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  15. Article | Journal of Law & Economics

    The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires

    Rafael Di Tella and Ernesto Schargrodsky

    We study the prices paid for basic inputs during a crackdown on corruption in the public hospitals of the city of Buenos Aires, Argentina, during 1996 97. We find a well-defined, negative effect on the measures used to capture corruption. Prices paid by hospitals for basic, homogeneous inputs decrease by 15 percent during the first 9 months of the crackdown. After this period prices increase, but they are still 10 percent lower than those prevailing before the crackdown. Relative to the precrackdown period, higher wages play no role in inducing lower input prices when audit intensity can be expected to be maximal (during the first phase of the crackdown) but have a negative and well-defined effect when audit intensity takes intermediate levels (the last phase of the crackdown). Controlling for fixed effects, we find that the wage elasticity of input prices exceeds .20. These results are consistent with the standard model of bribes of Gary Becker and George Stigler.

    Keywords: Crime and Corruption; Compensation and Benefits; Accounting Audits; Buenos Aires;

    Citation:

    Di Tella, Rafael, and Ernesto Schargrodsky. "The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires." Journal of Law & Economics 46, no. 1 (April 2003): 269–92.  View Details
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  16. Article | American Economic Review

    Rents, Competition and Corruption

    Alberto Ades and Rafael Di Tella

    Keywords: Crime and Corruption; Competition;

    Citation:

    Ades, Alberto, and Rafael Di Tella. "Rents, Competition and Corruption." American Economic Review 89, no. 4 (September 1999): 982–994.  View Details
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  17. Article | Journal of Political Economy

    Does Competition Kill Corruption?

    Christopher Bliss and Rafael Di Tella

    Corrupt agents (officials or gangsters) exact money from firms. Corruption affects the number of firms in a free-entry equilibrium. The degree of deep competition in the economy increases with lower overhead costs relative to profits and with a tendency toward similar cost structures. Increases in competition may not lower corruption. The model explains why a rational corrupt agent may extinguish the source of his bribe income by causing a firm to exit. Assessing the welfare effect of corruption is complicated by the fact that exit caused by corruption does not necessarily reduce social welfare.

    Keywords: Competition; Crime and Corruption;

    Citation:

    Bliss, Christopher, and Rafael Di Tella. "Does Competition Kill Corruption?" Journal of Political Economy 105, no. 5 (October 1997): 1001–1023.  View Details
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  18. Article | Economic Journal (Royal Economic Society)

    National Champions and Corruption: Some Unpleasant Interventionist Arithmetic

    Alberto Ades and Rafael Di Tella

    We present a hold-up model of investment where active industrial policy promotes both corruption and investment. Since corruption deters investment, the effect of industrial policy on investment is lower than when corruption is absent. We find evidence suggesting that corruption is indeed higher in countries pursuing active industrial policies. Policy implications are illustrated by decomposing the total effect of industrial policy into a positive, direct effect, and a negative, corruption-induced effect. In the presence of corruption, the total effect of industrial policy on investment ranges between 84 and 56 % of the direct impact. The magnitude of these corrections suggests that corruption considerations should not be absent from cost-benefit analyses of industrial policies.

    Keywords: Crime and Corruption;

    Citation:

    Ades, Alberto, and Rafael Di Tella. "National Champions and Corruption: Some Unpleasant Interventionist Arithmetic." Economic Journal (Royal Economic Society) 107, no. 443 (July 1997): 1023–43.  View Details
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  19. Article | Political Studies

    The New Economics of Corruption: A Survey and Some New Results

    Alberto Ades and Rafael Di Tella

    Keywords: Economics; Crime and Corruption;

    Citation:

    Ades, Alberto, and Rafael Di Tella. "The New Economics of Corruption: A Survey and Some New Results." Political Studies 45, no. 3 (summer 1997): 496–516. (Reprinted in Political Corruption, Paul Heywood (editor), Blackwell Publishers 1997. Reprinted (abridged version), in Liberalization and the New Corruption, Barbara Harris and Gordon White (editors), IDS Bulletin 1996.)  View Details
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Happiness and Beliefs

  1. Article | Journal of Experimental Child Psychology

    The Interplay Between Sharing Behavior and Beliefs About Others in Children During Dictator Games

    Hernando Santamaría-García, María Luz González-Gadea, Rafael Di Tella, Agustín Ibáñez and Mariano Sigman

    Previous studies in adults demonstrated that beliefs and sharing decisions in social scenarios are closely related. However, to date, little is known about the development of this relationship in children. By using a modified dictator game, we assessed sharing behavior and beliefs about others in children between 3 and 12 years old. We performed four studies (N = 376) aimed to assess whether decisions were related to beliefs (Studies 1 and 2) and whether information about the recipient’s forced sharing behavior would shape decisions and beliefs (Studies 3 and 4). Results of Studies 1 and 2 showed that beliefs about others’ generosity were related to children’s sharing behavior. In Studies 3 and 4, we found that only children older than 9 years shared more pieces of candy when they knew that the recipient would be forced to share (cooperative context) than when they knew that the recipient would be forced not to share (noncooperative context). Besides, children older than 6 years did not modify their beliefs about others’ generosity according to these social contexts. These results suggest that normative or preconceived beliefs about the functioning of the social world may guide social behavior in children.

    Keywords: Dictator game; altruism; Generosity; decision making; Development; Conveniently upset; Behavior; Values and Beliefs; Perception; Decision Making;

    Citation:

    Santamaría-García, Hernando, María Luz González-Gadea, Rafael Di Tella, Agustín Ibáñez, and Mariano Sigman. "The Interplay Between Sharing Behavior and Beliefs About Others in Children During Dictator Games." Journal of Experimental Child Psychology 166 (February 2018): 451–464.  View Details
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  2. Article | American Economic Review

    Conveniently Upset: Avoiding Altruism by Distorting Beliefs About Others' Altruism

    Rafael Di Tella, Ricardo Perez-Truglia, Andres Babino and Mariano Sigman

    We present results from a “corruption game” (a dictator game modified so that recipients can take a side payment in exchange for accepting a reduction in the overall size of the pie). Dictators (silently) treated to be able to take more of the recipient’s tokens, took more of them. They were also more likely to believe that recipients had accepted side payments, even if there was a prize for accuracy. The results favor the hypothesis that people avoid altruistic actions by distorting beliefs about others’ altruism.

    Keywords: convenient beliefs; cognitive dissonance; Values and Beliefs; Behavior; Cognition and Thinking;

    Citation:

    Di Tella, Rafael, Ricardo Perez-Truglia, Andres Babino, and Mariano Sigman. "Conveniently Upset: Avoiding Altruism by Distorting Beliefs About Others' Altruism." American Economic Review 105, no. 11 (November 2015): 3416–3442.  View Details
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  3. Comment | American Economic Review

    Fairness and Redistribution: Comment

    Rafael Di Tella and Juan Dubra

    In an influential paper, Alesina and Angeletos (2005)—henceforth, AA—argued that a preference for fairness could lead two identical societies to choose different economic systems. In particular, two equilibria might arise: one with low taxes and a belief that the income-generating process is "fair" because effort is important (an "American" equilibrium) and another with high taxes and the belief that the process is "unfair" because luck prevails. Piketty (1995) had shown that a similar pattern could arise from standard preferences if initial beliefs about the relative importance of effort and luck in generating income differed across the two societies, while Benabou and Tirole (2006) study this issue using more realistic preferences (Buera, Monge-Naranjo, and Primiceri 2011 discuss the evolution of beliefs about economic systems). A key contribution of AA is to obtain these two equilibria from identical societies assuming agents prefer outcomes that are fair, an important modification because fairness considerations seem central in the demand for redistribution, and because in several settings (as in some ultimatum games) such preferences for fairness can lead to large (material) inefficiencies.
    In this note we report a difficulty we encountered when interpreting the results in AA: we find multiplicity (and demand for redistribution) even if luck plays no role. In other words, there is multiplicity even if the equilibrium tax rate is independent of the signal-to-noise ratio (a quantity that expresses how important effort is, relative to luck, in the determination of income). This conflicts with the notion that the signal-to-noise ratio plays a central role in generating multiplicity with AA preferences for fairness.

    Keywords: fairness; taxes; beliefs; Economic Systems; Values and Beliefs; Fairness; Taxation;

    Citation:

    Di Tella, Rafael, and Juan Dubra. "Fairness and Redistribution: Comment." American Economic Review 103, no. 1 (February 2013): 549–553.  View Details
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  4. Article | Journal of Public Economics

    Reality versus Propaganda in the Formation of Beliefs about Privatization

    Rafael Di Tella, Sebastian Galiani and Ernesto Schargrodsky

    Argentina privatized most public utilities during the 1990s but re-nationalized the main water company in 2006. We study beliefs about the benefits of the privatization of water services amongst low- and middle-income groups immediately after the 2006 nationalization. Negative opinions about the privatization prevail. These are particularly strong amongst households that did not benefit from the privatization and amongst households that were reminded of the government's negative views about the privatization. A person's beliefs in the benefits of the water privatization were almost 30% more negative (relative to other privatizations) if his/her household did not gain access to water after the privatization. Similarly, a person's view of the water privatization (relative to other privatizations) was 16% more negative if he/she was read a vignette with some of the negative statements about the water privatization that Argentina's president expressed during the nationalization process. Interestingly, the effect of the vignette on households that gained water is insignificant, while it is largest (and significant) amongst households that did not gain water during the privatization. This suggests that propaganda was persuasive when it had a basis in reality.

    Keywords: Privatization; Business and Community Relations; Household; Government and Politics; Business and Government Relations; Public Ownership; Utilities Industry; Argentina;

    Citation:

    Di Tella, Rafael, Sebastian Galiani, and Ernesto Schargrodsky. "Reality versus Propaganda in the Formation of Beliefs about Privatization." Journal of Public Economics 96, nos. 5-6 (June 2012): 553–567.  View Details
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  5. Article | Cato Papers on Public Policy

    Free to Punish? The American Dream and the Harsh Treatment of Criminals

    Rafael Di Tella

    We describe the evolution of selective aspects of punishment in the U.S. over the period 1980-2004. We note that imprisonment increased around 1980, a period that coincides with the "Reagan revolution" in economic matters. We build an economic model where beliefs about economic opportunities and beliefs about punishment are correlated. We present three pieces of evidence (across countries, within the U.S., and an experimental exercise) that are consistent with the model.

    Keywords: Crime and Corruption;

    Citation:

    Di Tella, Rafael. "Free to Punish? The American Dream and the Harsh Treatment of Criminals." Cato Papers on Public Policy 1 (2011).  View Details
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  6. Working Paper | 2010

    Peronist Beliefs and Interventionist Policies

    Rafael Di Tella and Juan Dubra

    We study the logic of Peronist interventionist polices and the beliefs that support them. Instead of a comprehensive approach, we focus on three elements. First, we study beliefs and values about the economic system present in Peron's speeches during the period 1943-1955. Second, we study survey data for the 1990s on the beliefs of Peronist and non- Peronist voters in Argentina and Democrat and Republican voters in the U.S. While income and education suggest that Peronists (in relative terms) look like the American Democrats, their beliefs and values suggest that Peronists are the Argentine equivalent of the Republicans. Third, given that these beliefs are non-standard (for economists) we present a model formalizing some of their key aspects (for example, the idea that there is something more than a material exchange in labor relations).

    Keywords: History; Economic Systems; Values and Beliefs; Policy; Business and Government Relations; Argentina;

    Citation:

    Di Tella, Rafael, and Juan Dubra. "Peronist Beliefs and Interventionist Policies." NBER Working Paper Series, No. 16621, December 2010.  View Details
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  7. Article | Journal of Economic Behavior & Organization

    Happiness Adaptation to Income and to Status in an Individual Panel

    Rafael Di Tella and Robert MacCulloch

    We study adaptation to income and to status using individual panel data on the happiness of 7,812 people living in Germany from 1984 to 2000. Specifically, we estimate a "happiness equation" defined over several lags of income and status and compare the long-run effects. We can (cannot) reject the hypothesis of no adaptation to income (status) during the four years following an income (status) change. In the short run (current year) a one standard deviation increase in status and 52% of one standard deviation in income are associated with similar increases in happiness. In the long run (five-year average) a one standard deviation increase in status has a similar effect to an increase of 285% of a standard deviation in income. We also present different estimates of adaptation across subgroups. For example, we find that those on the right (left) of the political spectrum adapt to status (income) but not to income (status). We can reject equal relative adaptation (to income versus status) for these two subgroups.

    Keywords: Wages; Status and Position; Happiness; Income; Change; Germany;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "Happiness Adaptation to Income and to Status in an Individual Panel." Journal of Economic Behavior & Organization 76, no. 3 (December 2010): 834–852.  View Details
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  8. Article | Economics Letters

    Crime and Beliefs: Evidence from Latin America

    Rafael Di Tella, Javier Donna and Robert MacCulloch

    Keywords: Crime and Corruption; Values and Beliefs; Latin America;

    Citation:

    Di Tella, Rafael, Javier Donna, and Robert MacCulloch. "Crime and Beliefs: Evidence from Latin America." Economics Letters 99, no. 3 (June 2008): 566–569.  View Details
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  9. Article | Journal of Public Economics

    Crime and Punishment in the 'American Dream'

    Rafael Di Tella and Juan Dubra

    We observe that countries where belief in the "American dream" (i.e., effort pays) prevails also set harsher punishment for criminals. We know that beliefs are also correlated with several features of the economic system (taxation, social insurance, etc). Our objective is to study the joint determination of these three features (beliefs, punitiveness, and economic system) in a way that replicates the observed empirical patterns. We present a model where beliefs determine the types of contracts that firms order and whether workers exert effort. Some workers become criminals, depending on their luck in the labor market, the expected punishment, and an individual shock that we call "meanness." It is this meanness level that a penal system based on "retribution" tries to detect when deciding the severity of the punishment. We find that when initial beliefs differ, two equilibria can emerge out of identical fundamentals. In the "American" (as opposed to the "French") equilibrium, belief in the "American dream" is commonplace, workers exert effort, there are high-powered contracts (and income is unequally distributed) and punishments are harsh. Economists who believe that deterrence (rather than retribution) shapes punishment can interpret the meanness parameter as pessimism about future economic opportunities and verify that two similar equilibria emerge.

    Keywords: Crime and Corruption; Economic Systems; Values and Beliefs; Law Enforcement; Mathematical Methods; Personal Characteristics; United States;

    Citation:

    Di Tella, Rafael, and Juan Dubra. "Crime and Punishment in the 'American Dream'." Journal of Public Economics 92, no. 7 (July 2008).  View Details
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  10. Article | Quarterly Journal of Economics

    The Formation of Beliefs: Evidence from the Allocation of Land Titles to Squatters

    Rafael Di Tella, Sebastian F. Galiani and Ernesto S. Schargrodsky

    We study the formation of beliefs in a squatter settlement in the outskirts of Buenos Aires exploiting a natural experiment that induced an allocation of property rights that is exogenous to the characteristics of the squatters. There are significant differences in the beliefs that squatters with and without land titles declare to hold. Lucky squatters who end up with legal titles report beliefs closer to those that favor the workings of a free market. Examples include materialist and individualist beliefs (such as the belief that money is important for happiness or the belief that one can be successful without the support of a large group). The effects appear large. The value of a (generated) index of "market" beliefs is 20 percent higher for titled squatters than for un titled squatters, in spite of leading otherwise similar lives. Moreover, the effect is sufficiently large so as to make the beliefs of the squatters with legal titles broadly comparable to those of the general Buenos Aires population, in spite of the large differences in the lives they lead

    Keywords: Values and Beliefs; Property;

    Citation:

    Di Tella, Rafael, Sebastian F. Galiani, and Ernesto S. Schargrodsky. "The Formation of Beliefs: Evidence from the Allocation of Land Titles to Squatters." Quarterly Journal of Economics 122, no. 1 (February 2007).  View Details
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  11. Article | Journal of Development Economics

    Gross National Happiness As an Answer to the Easterlin Paradox?

    Rafael Di Tella and Robert MacCulloch

    The Easterlin Paradox refers to the fact that happiness data are typically stationary in spite of considerable increases in income. This amounts to a rejection of the hypothesis that current income is the only argument in the utility function. We find that the happiness responses of around 350,000 people living in the OECD between 1975 and 1997 are positively correlated with the level of income, the welfare state and (weakly) with life expectancy; they are negatively correlated with the average number of hours worked, environmental degradation (measured by SOx emissions), crime, openness to trade, inflation and unemployment–all controlling for country and year dummies. These effects separate across groups in a pattern that appears broadly plausible (e.g., the rich suffer environmental degradation more than the poor). Based on actual changes from 1975 to 1997, small contributions to happiness can be attributed to the increase in income in our sample. Interestingly, the actual changes in several of the 'omitted variables' such as life expectancy, hours worked, inflation and unemployment also contribute to happiness over this time period since life expectancy has risen and the others have, on average, fallen. Consequently the unexplained trend in happiness is even bigger than would be predicted if income was the only argument in the utility function. In other words, introducing omitted variables worsens the income-without-happiness paradox.

    Keywords: Wealth and Poverty; Happiness; Employment; Income; Mathematical Methods; Welfare or Wellbeing;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "Gross National Happiness As an Answer to the Easterlin Paradox?" Journal of Development Economics 86, no. 1 (April 2008).  View Details
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  12. Article | Journal of Economics & Management Strategy

    Information or Opinion? Media Bias as Product Differentiation

    Bharat Anand, Rafael Di Tella and Alexander Galetovic

    Keywords: Information; Media; Prejudice and Bias; Product;

    Citation:

    Anand, Bharat, Rafael Di Tella, and Alexander Galetovic. "Information or Opinion? Media Bias as Product Differentiation." Journal of Economics & Management Strategy 16, no. 3 (Fall 2007): 635–682.  View Details
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  13. Article | Journal of Economic Perspectives

    Some Uses of Happiness Data in Economics

    Rafael Di Tella and Robert MacCulloch

    Keywords: Happiness; Data and Data Sets; Economics;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "Some Uses of Happiness Data in Economics." Journal of Economic Perspectives 20, no. 1 (Winter 2006): 25–46.  View Details
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  14. Article | Journal of Public Economics

    Europe vs America: Institutional Hysteresis in a Simple Normative Model

    Rafael Di Tella and Robert MacCulloch

    We show how the differences in US and European institutions can arise in a normative model. The paper focuses on the labor market and the government's decision to set unemployment benefits in response to an unemployment shock. The government balances insurance considerations with the tax burden of benefits and the possibility that they introduce adverse “incentive effects” whereby benefits increase unemployment. It is found that when an adverse shock occurs, benefits should be increased most when the adverse incentive effects of benefits are largest. Adjustment costs of changing benefits introduce hysteresis and can help explain why post-oil shock benefits remained high in Europe but not in the US. Desirable features of the model are that we obtain an asymmetry out of a symmetric environment and that the mechanism yielding hysteresis is both simple (requires the third derivative of the utility function to be non-negative) and self-correcting. Empirical evidence concerning the role of corporatism is discussed.

    Keywords: optimal unemployment benefits; labor market institutions; hysteresis; Europe; United States;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "Europe vs America: Institutional Hysteresis in a Simple Normative Model." Journal of Public Economics 90, no. 12 (December 2006): 2161–86.  View Details
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  15. Article | Review of Economic Studies

    Partisan Social Happiness

    Rafael Di Tella and Robert MacCulloch

    We use a new approach to study questions in political economy that relies on data on the subjective well-being of a large sample of people living in the OECD over the period 1975-1992. Controlling for the personal characteristics of the respondents, year and country fixed effects and country-specific time trends, we find that the data describe social happiness functions for left-wing and right-wing individuals where inflation and unemployment enter negatively. We use these functions to test the root assumption of partisan business cycle models. The evidence is consistent with the hypothesis that left-wing individuals care more about unemployment relative to inflation than right-wingers. Interestingly, we find that individuals declare themselves to be happier when the party they support is in power, even after controlling for macroeconomic variables. The effect of politics is large. Finally, we find that these partisan differences cannot be traced back to income differences. That is, it is misleading to assume-as it is done in the previous literature-that the poor (rich) behave similarly to the left (right). For example, inflation and unemployment do not have differential effects across rich and poor and the happiness levels of these two groups are unaffected by the identity of the party in power. Our findings are hard to explain using median voter models but are to be expected in a partisan world.

    Keywords: political partisanship; political economy; Society; Happiness;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "Partisan Social Happiness." Review of Economic Studies 72, no. 2 (April 2005): 367–93.  View Details
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  16. Article | Journal of Public Economics

    Inequality and Happiness: Are Europeans and Americans Different?

    Rafael Di Tella, Alberto Alesina and Robert MacCulloch

    We study the effect of the level of inequality in society on individual well-being using a total of 123,668 answers to a survey question about “happiness”. We find that individuals have a lower tendency to report themselves happy when inequality is high, even after controlling for individual income, a large set of personal characteristics, and year and country (or, in the case of the US, state) dummies. The effect, however, is more precisely defined statistically in Europe than in the US. In addition, we find striking differences across groups. In Europe, the poor and those on the left of the political spectrum are unhappy about inequality; whereas in the US the happiness of the poor and of those on the left is uncorrelated with inequality. Interestingly, in the US, the rich are bothered by inequality. Comparing across continents, we find that left-wingers in Europe are more hurt by inequality than left-wingers in the US. And the poor in Europe are more concerned with inequality than the poor in America, an effect that is large in terms of size but is only significant at the 10% level. We argue that these findings are consistent with the perception (not necessarily the reality) that Americans have been living in a mobile society, where individual effort can move people up and down the income ladder, while Europeans believe that they live in less mobile societies.

    Keywords: Equality and Inequality; Happiness; Global Range; Local Range; United States; Europe;

    Citation:

    Di Tella, Rafael, Alberto Alesina, and Robert MacCulloch. "Inequality and Happiness: Are Europeans and Americans Different?" Journal of Public Economics 88, nos. 9-10 (August 2004): 2009–42.  View Details
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  17. Article | Review of Economics and Statistics

    The Macroeconomics of Happiness

    Rafael Di Tella, Robert MacCulloch and Andrew J. Oswald

    We show that macroeconomic movements have strong effects on the happiness of nations. First, we find that there are clear microeconomic patterns in the psychological well-being levels of a quarter of a million randomly sampled Europeans and Americans from the 1970s to the 1990s. Happiness equations are monotonically increasing in income, and have similar structure in different countries. Second, movements in reported well-being are correlated with changes in macroeconomic variables such as gross domestic product. This holds true after controlling for the personal characteristics of respondents, country fixed effects, year dummies, and country-specific time trends. Third, the paper establishes that recessions create psychic losses that extend beyond the fall in GDP and rise in the number of people unemployed. These losses are large. Fourth, the welfare state appears to be a compensating force: higher unemployment benefits are associated with higher natinal well-being.

    Keywords: Macroeconomics; Happiness;

    Citation:

    Di Tella, Rafael, Robert MacCulloch, and Andrew J. Oswald. "The Macroeconomics of Happiness." Review of Economics and Statistics 85, no. 4 (November 2003): 793–809.  View Details
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  18. Article | American Economic Review

    Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness

    Rafael Di Tella, Robert MacCulloch and Andrew Oswald

    Keywords: Inflation and Deflation; Job Cuts and Outsourcing; Happiness;

    Citation:

    Di Tella, Rafael, Robert MacCulloch, and Andrew Oswald. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness." American Economic Review 91, no. 1 (March 2001).  View Details
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Welfare State

  1. Article | Economic Journal (Royal Economic Society)

    Informal Family Insurance and the Design of the Welfare State

    Rafael Di Tella and Robert MacCulloch

    We study unemployment benefit provision when the family also provides social insurance. In the benchmark case, more generous State transfers crowd out family risk-sharing one-for-one. An extension gives the State an advantage in enforcing transfers through taxes (whereas families rely on self-enforcement). More generous State transfers lead to more than one-for-one reductions in intra-family insurance, so that total transfers to the unemployed fall as the State's generosity increases. This does not imply that the optimal size of the Welfare State is zero. Our results still hold when families are assumed to be better than the State at monitoringjob search activities of unemployed.

    Keywords: Insurance; Design; Welfare or Wellbeing;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "Informal Family Insurance and the Design of the Welfare State." Economic Journal (Royal Economic Society) 112, no. 477 (February 2002): 481–503.  View Details
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  2. Article | Journal of Labor Economics

    The Determination of Unemployment Benefits

    Rafael Di Tella and Robert J. MacCulloch

    While much empirical research exists on labor market consequences of unemployment benefits, there is remarkably little evidence on the forces determining benefits. We present a simple model where workers desire insurance against unemployment risk and benefits increase the unemployment rate. We then conduct one of the first empirical analyses of the determinants of the parameters of the benefit system. Using data for developed countries for 1971–89, controlling for year and country fixed effects and the government’s political color, we find evidence that the level of benefits falls when the unemployment rate is high. This is consistent with Wright’s tax effect.

    Keywords: unemployment; Compensation and Benefits;

    Citation:

    Di Tella, Rafael, and Robert J. MacCulloch. "The Determination of Unemployment Benefits." Journal of Labor Economics 20, no. 2 (April 2002): 404–34.  View Details
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  3. Article | Review of Economics and Statistics

    Unemployment Benefits As a Substitute for a Conservative Central Banker

    Rafael Di Tella and Robert MacCulloch

    In the many years since their introduction, positive theories of inflation have rarely been tested. This paper documents a negative relationship between inflation and the welfare state (proxied by the parameters of the unemployment benefit program) that is to be expected in such theories. Because unemployment benefits make the monetary authority less concerned about the plight of the unemployed, building a welfare state has a similar effect to appointing a conservative central banker. The relationship holds in a panel of 20 OECD countries over the period 1961-1992, a region where Romer finds no evidence of commitment problems. It holds controlling for country and time fixed effects, country-specific time trends, other covariates, and using a decadal panel. Interpreted as causal, the estimated effect is economically large: a 1 standard deviation decrease in benefit duration is predicted to add 1.4 percentage points onto inflation, or 31% of the standard deviation in inflation.

    Keywords: unemployment; welfare state; Compensation and Benefits; Inflation and Deflation;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "Unemployment Benefits As a Substitute for a Conservative Central Banker." Review of Economics and Statistics 86, no. 4 (November 2004): 911–23.  View Details
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  4. Article | European Economic Review

    The Consequences of Labor Market Flexibility: Panel Evidence Based on Survey Data

    Rafael Di Tella and Robert MacCulloch

    We introduce a new data set on hiring and firing restrictions for 21 OECD countries for the period 1984 –1990. The data are based on surveys of business people in the countries covered, so the indices we use are subjective in nature. Controlling for country and time fixed effects, and using dynamic panel data techniques, we find evidence that increasing the flexibility of the labor market increases both the employment rate and the rate of participation in the labor force. A conservative estimate suggests that if France were to make its labor markets as flexible as those in the US, its employment rate would increase 1.6 percentage points, or 14% of the employment gap between the two countries. The estimated effects are larger in the female than in the male labor market, although both groups seem to have similar long-run coeffcients. There is also some evidence that more flexibility leads to lower unemployment rates and to lower rates of long-term unemployment. We also find evidence consistent with the hypothesis that inflexible labor markets produce “jobless recoveries” and introduce more unemployment persistence.

    Keywords: job security provisions; subjective data; unemployment; Employment; Labor; Markets; Data and Data Sets;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "The Consequences of Labor Market Flexibility: Panel Evidence Based on Survey Data." European Economic Review 49, no. 5 (July 2005): 1225–59.  View Details
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Working Papers

  1. Working Paper | 2019

    Labor Market Shocks and the Demand for Trade Protection: Evidence from Online Surveys

    Rafael Di Tella and Dani Rodrik

    We study preferences for government action in response to layoffs resulting from different types of labor-market shocks. We consider the following shocks: technological change, a demand shift, bad management, and three kinds of international outsourcing. Respondents are given a choice among no government action, compensatory transfers, and trade protection. In response to these shocks, support for government intervention generally rises sharply and is heavily biased towards trade protection. Demand for import protection increases significantly in all cases, except for the “bad management” shock. Trade shocks generate more demand for protectionism, and, among trade shocks, outsourcing to a developing country elicits greater demand for protectionism than outsourcing to a developed country. The “bad management” shock is the only scenario that induces a desired increase in compensatory transfers. Effects appear to be heterogeneous across subgroups with different political preferences and education. Trump supporters are more protectionist than Clinton supporters, but preferences seem easy to manipulate: Clinton supporters primed with trade shocks are as protectionist as baseline Trump voters. Highlighting labor abuses in the exporting country increases the demand for trade protection by Clinton supporters but not Trump supporters.

    Keywords: Labor; Markets; System Shocks; Trade; Attitudes; Surveys;

    Citation:

    Di Tella, Rafael, and Dani Rodrik. "Labor Market Shocks and the Demand for Trade Protection: Evidence from Online Surveys." NBER Working Paper Series, No. 25705, March 2019.  View Details
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  2. Working Paper | HBS Working Paper Series | 2016

    Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation

    Rafael Di Tella, Juan Dubra and Alejandro Lagomarsino

    We analyze the role of people’s beliefs about the rich in the determination of public policy in the context of a randomized online survey experiment. A question we study is the desirability of government-private sector meetings, a variable we argue is connected to State capacity. Survey respondents primed with negative views about business leaders want fewer meetings as well as higher taxes for the top 1% and more regulation. We also study how these effects change when subjects are (additionally) primed with positive/negative views about government officials. Distrust in the government increases the preferred tax rate on the top 1% only when business legitimacy is low. A model with multiple equilibria helps interpret these findings. In one of the equilibria, meetings are allowed, business legitimacy is high, and people set a low income tax rate for businesspeople. In the other, meetings are forbidden, business legitimacy is low, and people set high taxes to punish the businesspeople for their corrupt behavior.

    Keywords: Business Legitimacy; state capacity; Meetings; taxes; Top 1%; regulation; Prejudice and Bias; Values and Beliefs; Taxation; Business and Government Relations;

    Citation:

    Di Tella, Rafael, Juan Dubra, and Alejandro Lagomarsino. "Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation." Harvard Business School Working Paper, No. 17-046, December 2016.  View Details
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Books

  1. Book | 2010

    The Economics of Crime: Lessons for and from Latin America

    Rafael Di Tella, Sebastian Edwards and Ernesto Schargrodsky

    Keywords: Economics; Crime and Corruption; Learning; Latin America;

    Citation:

    Di Tella, Rafael, Sebastian Edwards, and Ernesto Schargrodsky, eds. The Economics of Crime: Lessons for and from Latin America. National Bureau of Economic Research Conference Report. University of Chicago Press, 2010.  View Details
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  2. Casebook | 2005

    Institutions, Macroeconomics and the Global Economy

    Rafael Di Tella, Huw Pill and Ingrid Vogel

    Keywords: Macroeconomics; Economics;

    Citation:

    Di Tella, Rafael, Huw Pill, and Ingrid Vogel. Institutions, Macroeconomics and the Global Economy. World Scientific, 2005.  View Details
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Book Chapters and Other Publications

  1. Article | Proceedings of the National Academy of Sciences of the United States of America

    Maintaining Trust When Agents Can Engage in Self-deception

    Andres Babino, Hernan A. Makse, Rafael Di Tella and Mariano Sigman

    The coexistence of cooperation and selfish instincts is a remarkable characteristic of humans. Psychological research has unveiled the cognitive mechanisms behind self-deception. Two important findings are that a higher ambiguity about others’ social preferences leads to a higher likelihood of acting selfishly and that agents acting selfishly will increase their belief that others are also selfish. In this work, we posit a mathematical model of these mechanisms and explain their impact on the undermining of a global cooperative society. We simulate the behavior of agents playing a prisoner’s dilemma game in a random network of contacts. We endow each agent with these two self-deception mechanisms which bias her toward thinking that the other agent will defect. We study behavior when a fraction of agents with the “always defect” strategy is introduced in the network. Depending on the magnitude of the biases the players could start a cascade of defection or isolate the defectors. We find that there are thresholds above which the system approaches a state of complete distrust.

    Keywords: Behavioral economics; cognitive neuroscience; corruption; cooperation; self-deception; Trust; Behavior;

    Citation:

    Babino, Andres, Hernan A. Makse, Rafael Di Tella, and Mariano Sigman. "Maintaining Trust When Agents Can Engage in Self-deception." Proceedings of the National Academy of Sciences of the United States of America 115, no. 35 (August 28, 2018): 8728–8733.  View Details
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  2. Article | Journal of Experimental Child Psychology

    The Interplay Between Sharing Behavior and Beliefs About Others in Children During Dictator Games

    Hernando Santamaría-García, María Luz González-Gadea, Rafael Di Tella, Agustín Ibáñez and Mariano Sigman

    Previous studies in adults demonstrated that beliefs and sharing decisions in social scenarios are closely related. However, to date, little is known about the development of this relationship in children. By using a modified dictator game, we assessed sharing behavior and beliefs about others in children between 3 and 12 years old. We performed four studies (N = 376) aimed to assess whether decisions were related to beliefs (Studies 1 and 2) and whether information about the recipient’s forced sharing behavior would shape decisions and beliefs (Studies 3 and 4). Results of Studies 1 and 2 showed that beliefs about others’ generosity were related to children’s sharing behavior. In Studies 3 and 4, we found that only children older than 9 years shared more pieces of candy when they knew that the recipient would be forced to share (cooperative context) than when they knew that the recipient would be forced not to share (noncooperative context). Besides, children older than 6 years did not modify their beliefs about others’ generosity according to these social contexts. These results suggest that normative or preconceived beliefs about the functioning of the social world may guide social behavior in children.

    Keywords: Dictator game; altruism; Generosity; decision making; Development; Conveniently upset; Behavior; Values and Beliefs; Perception; Decision Making;

    Citation:

    Santamaría-García, Hernando, María Luz González-Gadea, Rafael Di Tella, Agustín Ibáñez, and Mariano Sigman. "The Interplay Between Sharing Behavior and Beliefs About Others in Children During Dictator Games." Journal of Experimental Child Psychology 166 (February 2018): 451–464.  View Details
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  3. Article | Latin American Economic Review

    Some Elements of Peronist Beliefs and Tastes

    Rafael Di Tella and Juan Dubra

    We study the beliefs and values of Peronism. Instead of a comprehensive approach, we focus on three elements. First, we study beliefs and values about the economic system present in Peron’s speeches during the period 1943–1955. Second, given that these beliefs are nonstandard (for economists), we present two models formalizing some of the key aspects (for example, the idea that there is something more than a material exchange in labor relations). Third, we study survey data for the 1990s on the beliefs of Peronist and non-Peronist voters in Argentina and Democrat and Republican voters in the United States. While income and education suggest that Peronists (in relative terms) look like the Democrats, their beliefs and values suggest that Peronists are the Argentine equivalent of the Republicans.

    Keywords: populism; altruism; Exploitation; Economic Systems; Values and Beliefs; Argentina;

    Citation:

    Di Tella, Rafael, and Juan Dubra. "Some Elements of Peronist Beliefs and Tastes." Latin American Economic Review 27, no. 1 (December 2018).  View Details
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  4. Article | Latin American Economic Review

    Introduction to Argentine Exceptionalism

    Edward L. Glaeser, Rafael Di Tella and Lucas Llach

    This article is an introduction to the special collection on Argentine Exceptionalism. First, we discuss why the case of Argentina is generally regarded as exceptional: the country was among the richest in the world at the beginning of the 20th century, but it gradually lost this place of privilege. We discuss that most explanations regarding the hypothesis of Argentine Exceptionalism fall into one or several of four categories. The first explanation is to challenge the exceptionalism hypothesis, either by arguing that the country was not so rich at the beginning of the 20th century or that it is not so poor now. The second explanation states that the country failed to generate growth supporting institutions despite its wealth, thus leading to a relative decline in its income level. The next explanation is that the country faced a series of adverse external shocks that disfavored what had been a successful growth model. Finally, scholars have also stated that exceptionalism is a consequence of poor policy choices, in particular a tendency towards state intervention and isolationism. Next, we introduce the remaining papers of the special collection and how they relate to the aforementioned hypothesis. Finally, we offer some concluding remarks regarding this article.

    Keywords: Argentine exceptionalism; Economic History; Economy; History; Argentina;

    Citation:

    Glaeser, Edward L., Rafael Di Tella, and Lucas Llach. "Introduction to Argentine Exceptionalism." Latin American Economic Review 27, no. 1 (December 2018).  View Details
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  5. Chapter | The Economics of Crime: Lessons for and from Latin America | 2010

    Crime Distribution and Victim Behavior during a Crime Wave

    Rafael Di Tella, Sebastian Galiani and Ernesto Schargrodsky

    The study of how crime affects different income groups faces the difficulty that crime-avoiding activities vary across these groups. Thus, a lower victimization rate in one group may not reflect a lower burden of crime, but rather a higher investment in crime avoidance. Moreover, protection activities by one group can displace crime onto another group. We take advantage of a dramatic increase in crime rates in Argentina during the late 1990s to document several interesting patterns. First, the increase in victimization experienced by the poor is larger than the increase endured by the rich. The difference appears large: low-income people have experienced increases in victimization rates that are almost 50% higher than those suffered by high-income people. Second, for home robberies, where the rich can protect themselves (by hiring private security, for example), we find significantly larger increases in victimization rates amongst the poor. In contrast, for robberies on the street, where the rich can only mimic the poor (by not using jewelry, for example), we find similar increases in victimization for both income groups. Third, we document direct evidence on pecuniary and non-pecuniary protection activities by both the rich and poor, ranging from the avoidance of dark places to the hiring of private security. Fourth, we estimate a negative correlation between changes in protection and mimicking and changes in crime victimization. Our findings are consistent with the presence of a negative externality on the poor arising from the protection expenditures of the rich.

    Keywords: Safety; Wealth and Poverty; Selection and Staffing; Crime and Corruption; Income; Leading Change; Information Management; Argentina;

    Citation:

    Di Tella, Rafael, Sebastian Galiani, and Ernesto Schargrodsky. "Crime Distribution and Victim Behavior during a Crime Wave." Chap. 5 in The Economics of Crime: Lessons for and from Latin America, edited by Rafael Di Tella, Sebastian Edwards, and Ernesto Schargrodsky, 175–204. National Bureau of Economic Research Conference Report. University of Chicago Press, 2010.  View Details
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  6. Chapter | The Natural Resources Trap: Private Investment without Public Commitment | 2010

    A Resource Belief-Curse: Oil and Individualism

    Rafael Di Tella, Juan Dubra and Robert MacCulloch

    We study the correlation between a belief concerning individualism and a measure of luck in the US during the period 1983-2004. The measure of beliefs is the answer to a question related to whether the poor should be helped by the government or if they should help themselves, while the measure of luck is the share of the oil industry in the state's economy multiplied by the price of oil. The correlation is negative, suggesting that more reliance on luck is correlated with less individualism. We provide three short models that help interpret this correlation. One implication of this finding is that societies that depend heavily on oil, and perhaps natural resources more generally, will experience a heavier demand for government intervention. We argue that this is one aspect that the good design of policies on the extraction of oil and mineral resources should take into account.

    Keywords: History; Natural Environment; Non-Renewable Energy; Values and Beliefs; Price; Poverty; Policy; Economy; United States;

    Citation:

    Di Tella, Rafael, Juan Dubra, and Robert MacCulloch. "A Resource Belief-Curse: Oil and Individualism." In The Natural Resources Trap: Private Investment without Public Commitment, edited by William Hogan and Federico Sturzenegger. Cambridge, MA: MIT Press, 2010.  View Details
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  7. Chapter | International Differences in Well-Being | 2010

    Happiness Adaptation to Income beyond 'Basic Needs'

    Rafael Di Tella and Robert MacCulloch

    We test for whether, once "basic needs" are satisfied, there is happiness adaptation to further gains in income using three data sets. Individual German Panel Data from 1985 to 2000, and data on the well-being of over 600,000 people in a panel of European countries from 1975 to 2002, shows different patterns of adaptation to income across the rich and poor. We find evidence that for wealthy Germans, and for the rich half of European nations, higher levels of per capita income don't buy greater happiness. The reason appears to be adaptation. However even for the rich half of European nations such habituation may take over five years so the happiness gains that they experience, while not permanent, can still be relatively long-lasting. Finally we study a cross section of nations in 2005 from the World Gallup Poll and find that the past 45 years of economic growth (from 1960 to 2005) in the rich half of nations has not brought happiness gains above those that were already in place once the 1960s standard of living had been achieved. However in the poorest half of nations we cannot reject the null hypothesis that the happiness gains they have experienced from the past 45 years of growth have been the same as the gains that they experienced from growth prior to the 1960s.

    Keywords: Wealth and Poverty; Happiness; Human Needs; Income; Adaptation; Economic Growth;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "Happiness Adaptation to Income beyond 'Basic Needs'." Chap. 8 in International Differences in Well-Being, edited by Ed Diener, John Helliwell, and Daniel Kahneman, 217–247. New York: Oxford University Press, 2010.  View Details
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  8. Chapter | Policymaking Insights from Behavioral Economics | 2009

    Should Central Banks Maximize Happiness? Happiness, Contentment and Other Emotions for Central Banks

    Rafael Di Tella and Robert MacCulloch

    Keywords: Central Banking; Happiness; Satisfaction; Emotions; Banking Industry;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "Should Central Banks Maximize Happiness? Happiness, Contentment and Other Emotions for Central Banks." Chap. 6 in Policymaking Insights from Behavioral Economics, edited by Christopher L. Foote, Lorenz Goette, and Stephan Meier, 309–355. Boston, MA: Federal Reserve Bank of Boston, 2009.  View Details
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  9. Chapter | International Handbook on the Economics of Corruption | 2006

    Corruption and the Demand for Regulating Capitalists

    Rafael Di Tella and Robert MacCulloch

    Keywords: Crime and Corruption; Governing Rules, Regulations, and Reforms; Economic Systems;

    Citation:

    Di Tella, Rafael, and Robert MacCulloch. "Corruption and the Demand for Regulating Capitalists." Chap. 12 in International Handbook on the Economics of Corruption, edited by Susan Rose-Ackerman, 352–80. Edward Elgar Publishing, 2006.  View Details
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  10. Chapter | Corrupt Exchanges: Empirical Themes in the Politics and Political Economy of Corruption | 2002

    Political and Economic Incentives during an Anti-Corruption Crackdown

    Rafael Di Tella and Ernesto S. Schargrodsky

    Keywords: Crime and Corruption; Motivation and Incentives; Government and Politics; Economics;

    Citation:

    Di Tella, Rafael, and Ernesto S. Schargrodsky. "Political and Economic Incentives during an Anti-Corruption Crackdown." Chap. 7 in Corrupt Exchanges: Empirical Themes in the Politics and Political Economy of Corruption. Vol. 23, edited by Donatella della Porta and Susan Rose-Ackerman, 118–32. Interdisziplinäre Studien zu Recht und Staat. Baden-Baden: Nomos Verlagsgesellschaft, 2002.  View Details
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  11. Chapter | The Corruption that Compromises Health: Studies of Public Hospitals in Latin America | 2001

    Shining Light in Dark Corners

    Rafael Di Tella and William D. Savedoff

    Citation:

    Di Tella, Rafael, and William D. Savedoff. "Shining Light in Dark Corners." Chap. 1 in The Corruption that Compromises Health: Studies of Public Hospitals in Latin America, edited by Rafael Di Tella and William D. Savedoff. Inter-American Development Bank, 2001, Spanish ed.  View Details
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  12. Book | 2001

    Diagnosis Corruption: Fraud in Latin America's Public Hospitals

    Rafael Di Tella and William D. Savedoff

    Keywords: Crime and Corruption; Health; Health Industry; Latin America;

    Citation:

    Di Tella, Rafael, and William D. Savedoff. Diagnosis Corruption: Fraud in Latin America's Public Hospitals. Inter-American Development Bank, 2001.  View Details
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  13. Article | World Competitiveness Report

    Competitiveness and the New Industrial Policy

    Rafael Di Tella, Alberto Ades and Mark Carney

    Keywords: industrial policy; competitiveness; productivity; Competition; Performance Productivity; Supply and Industry; Policy;

    Citation:

    Di Tella, Rafael, Alberto Ades, and Mark Carney. "Competitiveness and the New Industrial Policy." World Competitiveness Report (1995): 351–355.  View Details
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  14. Chapter | Venezuela Before Chávez: Anatomy of an Economic Collapse | Forthcoming

    Oil, Macroeconomic Volatility and Crime in the Determination of Beliefs in Venezuela

    Rafael Di Tella, Javier Donna and Robert MacCulloch

    Book Abstract: At the beginning of the twentieth century Venezuela had one of the poorest economies in Latin America, but by 1970 it had become the richest country in the region and one of the twenty richest countries in the world, ahead of countries such as Greece, Israel, and Spain. Between 1978 and 2001, however, Venezuela's economy went sharply in reverse, with non-oil GDP declining by almost 19% and oil GDP by an astonishing 65%. What accounts for this drastic turnabout? The editors of Venezuela Before Chávez, who each played a policymaking role in the country's economy during the past two decades, have brought together a group of economists and political scientists to systematically examine the impact of a wide range of factors affecting the economy's collapse, from the cost of labor regulation and the development of financial markets to the weakening of democratic governance and the politics of decisions about industrial policy.

    Keywords: Macroeconomics; Volatility; Crime and Corruption; Values and Beliefs; Non-Renewable Energy; Energy Industry; Venezuela;

    Citation:

    Di Tella, Rafael, Javier Donna, and Robert MacCulloch. "Oil, Macroeconomic Volatility and Crime in the Determination of Beliefs in Venezuela." Chap. 14 in Venezuela Before Chávez: Anatomy of an Economic Collapse, edited by Ricardo Hausmann and Francisco Rodriguez. Penn State University Press, 2014.  View Details
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Cases and Teaching Materials

  1. Case | HBS Case Collection | October 2018 (Revised August 2019)

    Everybody Knows: Russia and the Election

    Rawi Abdelal, Rafael Di Tella and Galit Goldstein

    Following a contentious presidential race, Donald Trump’s 2016 election destabilized America’s status quo. Academics, journalists, politicians and the public at large examined why Trump had won. Many Americans, inside and outside the government, asserted that a state-led Russian disinformation campaign had influenced the election’s outcome. The leaders of major social media companies, including Twitter and Facebook, also conceded that state actors had gamed their platforms to influence American politics. Trump himself made conflicting statements, while Russian politicians asserted that American elites had rhetorically weaponized the issue of election interference to justify an unwillingness to work with their country internationally. It was hard to parse where reality ended and political rhetoric began. Post-election, the future of U.S.-Russia relations remained unclear, and the United States grappled with how to regulate cyberspace. Analyzing the 2016 election and its aftershocks helps students confront interrelated questions about business regulation, international relations, cultural identity, strategic communications, political will and the Internet. The case encourages students to consider the boundary between narrative and reality and examine subjectivity, objectivity, and power in the public and private sectors.

    Keywords: Strategic industry; strategic alliances (business); Business and Government; business and public policy; business and society; Media Businesses; media content; media slant; media regulation; social media; internet of everything; government policy; politics; political campaigns; political strategy; political turmoil; government; Government Regulation; Security; international business; International Relations; National Security; Political Elections; News; Media; Internet; Rights; Problems and Challenges; Globalization; Business and Community Relations; Business and Government Relations; Government Legislation; Risk and Uncertainty; Cognition and Thinking; Conflict and Resolution; Identity; Civil Society or Community; Culture; Public Opinion; Social Issues; War; Online Technology; Public Administration Industry; United States; Russia;

    Citation:

    Abdelal, Rawi, Rafael Di Tella, and Galit Goldstein. "Everybody Knows: Russia and the Election." Harvard Business School Case 719-012, October 2018. (Revised August 2019.)  View Details
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  2. Case | HBS Case Collection | February 2019 (Revised March 2019)

    Populism in Bolivia: From Goni's Neoliberal Shock to Evo's Oil Contract Renegotiations

    Vincent Pons, Rafael Di Tella and Annelena Lobb

    Citation:

    Pons, Vincent, Rafael Di Tella, and Annelena Lobb. "Populism in Bolivia: From Goni's Neoliberal Shock to Evo's Oil Contract Renegotiations." Harvard Business School Case 719-001, February 2019. (Revised March 2019.)  View Details
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  3. Technical Note | HBS Case Collection | January 2019

    The Punishment of Business

    Rafael Di Tella, Jose Liberti and James Weber

    Citation:

    Di Tella, Rafael, Jose Liberti, and James Weber. "The Punishment of Business." Harvard Business School Technical Note 719-048, January 2019.  View Details
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  4. Case | HBS Case Collection | October 2017 (Revised April 2019)

    Hank and Nancy: The Subprime Crisis, the Run on Lehman and the Shadow Banks, and the Decision to Bailout Wall Street

    Rafael Di Tella, Alberto Cavallo and Aldo Sesia

    Citation:

    Di Tella, Rafael, Alberto Cavallo, and Aldo Sesia. "Hank and Nancy: The Subprime Crisis, the Run on Lehman and the Shadow Banks, and the Decision to Bailout Wall Street." Harvard Business School Case 718-022, October 2017. (Revised April 2019.)  View Details
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  5. Case | HBS Case Collection | July 2017 (Revised December 2018)

    Populism in America: Fake News, Alternative Facts and Elite Betrayal in the Trump Era

    Rafael Di Tella and Sarah McAra

    During the 2016 U.S. election, long-time politician Hillary Clinton, a Democrat, and celebrity billionaire Donald Trump, a Republican, faced off in a contentious race for president. In the primaries, candidates from both major political parties used anti-establishment messaging to appeal to the electorate, a theme that had been on the sidelines of U.S. political discourse for decades. Trump, in particular, played into the rising anti-establishment sentiment as he embraced a populist platform and emphasized his position as a Washington-outsider. He proved to be an unpredictable and incendiary candidate on the campaign trail, garnering much media attention and creating divisions within the traditional Republican base, yet his directness and promise to “Make America Great Again” resonated with several segments of the population. While many experts predicted a Clinton victory, Trump was ultimately elected president in November 2016. During his first 100 days in office, Trump tested the boundaries of the U.S. government, and observers looked on with uncertainty as he took an unconventional and unpredictable approach to policymaking.

    Keywords: populism; elites; income inequality; social media; Government and Politics; Globalization; Political Elections; News; Media; Labor; Prejudice and Bias; Public Opinion; Social Issues; Wealth and Poverty;

    Citation:

    Di Tella, Rafael, and Sarah McAra. "Populism in America: Fake News, Alternative Facts and Elite Betrayal in the Trump Era." Harvard Business School Case 718-005, July 2017. (Revised December 2018.)  View Details
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  6. Case | HBS Case Collection | July 2017 (Revised November 2017)

    Media Markets Down South: Goldman Sachs' Investment in Grupo Clarín

    Rafael Di Tella, Jose Liberti and Sarah McAra

    Founded in 1945, Grupo Clarín expanded over several decades to become Argentina’s largest media conglomerate. With leading positions in newspapers, broadcast television, broadcast radio, cable television, and Internet services, Grupo Clarín caught the attention of U.S.-based investment bank Goldman Sachs, which acquired an 18% share of Grupo Clarín for US$500 million in 1999. While Grupo Clarín struggled during the economic crisis from 2001 to 2002, it was well positioned to grow as the economy began to recover in 2003, in part due to government policies that helped stabilize the media industry. Now in October 2007, Grupo Clarín was preparing to make an IPO in London and Buenos Aires, and fund managers at Goldman Sachs were reevaluating their position. What price would the IPO reach and how much, if any, of their stake should they sell? What was the return Goldman Sachs would obtain if it sold its entire position, or just one part?

    Keywords: Media; Business and Government Relations; Risk and Uncertainty; Initial Public Offering; Investment; Journalism and News Industry; Media and Broadcasting Industry; Argentina;

    Citation:

    Di Tella, Rafael, Jose Liberti, and Sarah McAra. "Media Markets Down South: Goldman Sachs' Investment in Grupo Clarín." Harvard Business School Case 718-007, July 2017. (Revised November 2017.)  View Details
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  7. Case | HBS Case Collection | July 2017 (Revised November 2017)

    'Clarín Lies!': Bias, Post-Truth, and Populism in Argentina's Media War

    Rafael Di Tella, Jose Liberti and Sarah McAra

    In 2012, Argentine media conglomerate Grupo Clarín and President Cristina Fernández de Kirchner were embroiled in what some called “the mother of all battles.” Grupo Clarín was one of the preeminent media companies in Argentina, with leading newspapers, cable television and Internet services, and broadcast television and radio stations. Some critics contended the company had prospered over several decades by managing relationships with governments of varying political color, such as with Néstor Kirchner (2003–2007), the popular president who helped lead the country out of the financial crisis. But its relationship with the government changed in 2008 when a divisive agricultural export tax sparked a conflict between Grupo Clarín and President Cristina Kirchner, Néstor Kirchner’s wife and successor. Then in 2009, in a call for “democratizing” the media, Cristina Kirchner introduced a media reform law that would significantly limit Grupo Clarín’s operations. By 2012, the conglomerate had delayed the law’s implementation through the courts, but would likely have to restructure to accommodate the new regulatory environment. The case allows students to consider the assumptions that underlie media regulation and to debate the role of media in society. It can also be used to discuss how to evaluate a business decision in an uncertain regulatory environment.

    Keywords: media regulation; Media; Government and Politics; Policy; Newspapers; Government Legislation; Business and Government Relations; Risk and Uncertainty; Monopoly; Journalism and News Industry; Media and Broadcasting Industry; Argentina;

    Citation:

    Di Tella, Rafael, Jose Liberti, and Sarah McAra. "'Clarín Lies!': Bias, Post-Truth, and Populism in Argentina's Media War." Harvard Business School Case 718-008, July 2017. (Revised November 2017.)  View Details
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  8. Case | HBS Case Collection | June 2017 (Revised August 2018)

    Goodbye IMF Conditions, Hello Chinese Capital: Zambia's Copper Industry and Africa's Break with Its Colonial Past

    Rafael Di Tella, Vincent Pons, Sarah Mehta and David Lane

    Over the past several decades, rapid growth in Chinese investment and trade has created for Africa a new development partner. China represents an alternative to U.S. and European nations whose past imperialism, resource avarice, and economic dictates—through the conditionality of IMF and World Bank lending—remain a negative legacy. This case uses the story of Zambia's Chambishi copper mine, which was purchased in 1998 by the state-owned China Non-Ferrous Metals Mining Corporation, to illustrate China’s growing interest and involvement in the African continent. While many in Africa welcome the substantial Chinese investment, resentment over labor abuses, low pay, and substandard working conditions at some Chinese-owned enterprises fuels anti-China sentiment. At Chambishi copper mine, a 2005 explosion, caused by management's shoddy adherence to safety standards, killed nearly 50 miners and sparked outrage among Zambians. The explosion marked the first in a long series of protests and safety violations that would unfold at Chambishi over the next ten years.

    Keywords: copper; imperialism; IMF; World Bank; ODA; debt relief; Growth and Development; Business and Stakeholder Relations; Labor and Management Relations; History; Development Economics; China; Zambia; Africa;

    Citation:

    Di Tella, Rafael, Vincent Pons, Sarah Mehta, and David Lane. "Goodbye IMF Conditions, Hello Chinese Capital: Zambia's Copper Industry and Africa's Break with Its Colonial Past." Harvard Business School Case 717-034, June 2017. (Revised August 2018.)  View Details
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  9. Case | HBS Case Collection | June 2016 (Revised December 2017)

    The Cheese and the Oligarchs: The Politics, the Media, and Israel's Dream of a Start-Up Nation

    Rafael Di Tella and Christine Snively

    Israel enjoyed the highest concentration of technology start-ups in the world per capita. Despite regional instability, the country maintained strong economic growth and was considered a high-tech powerhouse. But not all Israelis benefited. Between the 1980s and 2010s, income distribution had widened. By 2015, 20 business groups—nearly all family owned—controlled one in four listed companies through corporate pyramids. Public anger over the high cost of living, which many believed was due to a lack of competition, led to a series of protests. Some academics and members of the Knesset (Parliament) called for reforms to limit the activities of corporate pyramids.

    Keywords: Entrepreneurship; Technology; Business Conglomerates; Business Startups; Israel;

    Citation:

    Di Tella, Rafael, and Christine Snively. "The Cheese and the Oligarchs: The Politics, the Media, and Israel's Dream of a Start-Up Nation." Harvard Business School Case 716-060, June 2016. (Revised December 2017.)  View Details
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  10. Case | HBS Case Collection | December 2014 (Revised November 2015)

    Governing the 'Chinese Dream': Corruption, Inequality and the Rule of Law

    Rafael Di Tella, Meg Rithmire and Kait Szydlowski

    Xi Jinping assumed his position as head of China's fifth generation of leaders in 2012. Xi was head of both the People's Republic of China and the Chinese Communist Party, which had ruled China since 1949. Xi inherited a country far more unequal than the one that Mao Zedong, Communist China's first leader, had left behind in 1978. The growth of markets had made China much wealthier, but also generated many social problems, including inequality, corruption, and social protests. This case discusses China's political and economic development in the 20th century to situate Xi's—and China's—contemporary challenges.

    Keywords: China; Growth; inequality; Wealth and Poverty; social stability; perceptions of inequality; chinese dream; chinese political thought; corruption; Equality and Inequality; China;

    Citation:

    Di Tella, Rafael, Meg Rithmire, and Kait Szydlowski. "Governing the 'Chinese Dream': Corruption, Inequality and the Rule of Law." Harvard Business School Case 715-023, December 2014. (Revised November 2015.)  View Details
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  11. Case | HBS Case Collection | March 2014

    Inequality and Growth in the 'Chinese Dream'

    Rafael Di Tella, Meg Rithmire and Kaitlyn Szydlowski

    Xi Jinping assumed his position as head of China's fifth generation of leaders in 2012. Xi was head of both the People's Republic of China and the Chinese Communist Party, which had ruled China since 1949. Xi inherited a country far more unequal than the one that Mao Zedong, Communist China's first leader, had left behind in 1978. The growth of markets had made China much wealthier, but also generated many social problems, including inequality, corruption, and social protests. This case discusses China's political and economic development in the 20th century to situate Xi's—and China's—contemporary challenges.

    Keywords: China; Growth; inequality; Wealth and Poverty; social stability; perceptions of inequality; chinese dream; chinese political thought; corruption; Equality and Inequality; China;

    Citation:

    Di Tella, Rafael, Meg Rithmire, and Kaitlyn Szydlowski. "Inequality and Growth in the 'Chinese Dream'." Harvard Business School Case 714-440, March 2014.  View Details
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  12. Case | HBS Case Collection | December 2013 (Revised August 2019)

    Breaking Bad (the Rules): Argentina Defaults, Inflates (and Grows), 1997–2015

    Rafael Di Tella and Fernanda Miguel

    In late October 2011, after losing 1 billion of dollar reserves in one month, the Argentine government began imposing a series of currency controls, limiting the ability to buy foreign currency. As of October 2011, Argentina's tax collection agency AFIP had been granted the power to approve or reject all requests to buy dollars with pesos in Argentina's banking system. By June 2012, AFIP had removed "saving" as a legitimate explanation. While the official exchange rate was approaching six pesos to the dollar, the black market was demanding almost ten pesos to the dollar—a nearly 65% difference. These were not the first currency restrictions that Argentina had imposed on its citizens.

    Keywords: Default; inflation; Inflation and Deflation; Currency; Governance Controls; Argentina;

    Citation:

    Di Tella, Rafael, and Fernanda Miguel. "Breaking Bad (the Rules): Argentina Defaults, Inflates (and Grows), 1997–2015." Harvard Business School Case 714-036, December 2013. (Revised August 2019.)  View Details
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  13. Case | HBS Case Collection | March 2012 (Revised April 2012)

    The Korean Model of Shared Growth, 1960-1990

    Aldo Musacchio, Rafael Di Tella and Jonathan Schlefer

    Keywords: History; Equality and Inequality; Income; Economic Growth; Policy; Economy; South Korea;

    Citation:

    Musacchio, Aldo, Rafael Di Tella, and Jonathan Schlefer. "The Korean Model of Shared Growth, 1960-1990." Harvard Business School Case 712-052, March 2012. (Revised April 2012.)  View Details
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  14. Case | HBS Case Collection | April 2011 (Revised December 2017)

    Latvia: Navigating the Strait of Messina

    Rafael Di Tella, Rawi Abdelal and Natalie Kindred

    This case describes Latvia's transition from a Soviet republic into an EU member, its economic boom and subsequent bust in 2008, and its policy response. After implementing significant economic and political reforms in order to qualify for EU membership in 2004, Latvia had turned its sights toward joining the single-currency eurozone, pegging its currency to the euro in 2005 as a step toward that goal. From 2000 to 2007, Latvia achieved faster GDP growth than any EU state. However, when large inflows of capital suddenly dried up in 2008, Latvia had to obtain a financial rescue package from the IMF, World Bank, EU, and several regional countries in order to avoid a full-blown financial and currency crisis. Latvia then adopted an aggressive economic adjustment program centered on maintaining its currency peg, which meant competitiveness would have to be restored by reducing domestic prices, wages, and public expenditures in order to drive down the real exchange rate. Latvia's policy program and initial results are discussed in the case.

    Keywords: Currency Exchange Rate; Competitive Strategy; Economic Growth; Policy; Financial Crisis; Economic Slowdown and Stagnation; Latvia;

    Citation:

    Di Tella, Rafael, Rawi Abdelal, and Natalie Kindred. "Latvia: Navigating the Strait of Messina." Harvard Business School Case 711-053, April 2011. (Revised December 2017.)  View Details
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  15. Case | HBS Case Collection | April 2011 (Revised February 2016)

    Jamaica's Anemic Growth: The IMF, China and the Debt(th) Trap

    Rafael Di Tella and Natalie Kindred

    This case describes the economic development problems faced by the small Caribbean-island country of Jamaica over most of the past half-century. The Jamaican economy showed relatively strong growth in the 1960s but stagnated in the 1970s. By the end of that decade, Jamaica was forced to turn to the International Monetary Fund (IMF) for balance-of-payments support. Over the 1980s and early 1990s, the unpopular policy conditions associated with IMF loan programs made the Fund a lightning rod for criticism over Jamaica's lack of economic progress. Jamaicans celebrated the end of IMF borrowing in the mid-1990s, but a severe financial crisis later that decade created a new layer of economic problems. In 2010, in the context of the global economic downturn, Jamaica once again returned to the IMF for financing support. This case allows students to explore the complicated economic difficulties faced by Jamaica, which remains burdened by a self-reinforcing set of interrelated factors, including high public debt, a sluggish private sector, an inefficient public sector, poverty, and crime, among others.

    Keywords: Government Administration; Economic Slowdown and Stagnation; International Finance; Crime and Corruption; Poverty; Private Sector; Insolvency and Bankruptcy; Economy; Developing Countries and Economies; Borrowing and Debt; Jamaica;

    Citation:

    Di Tella, Rafael, and Natalie Kindred. "Jamaica's Anemic Growth: The IMF, China and the Debt(th) Trap." Harvard Business School Case 711-031, April 2011. (Revised February 2016.)  View Details
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  16. Case | HBS Case Collection | March 2011 (Revised June 2016)

    Hungary: Economic Crisis and a Shift to the Right

    Rafael M. Di Tella, Matthew C. Weinzierl and Jacob Kuipers

    Instructors may also obtain a Teaching Note, written by this case's author, that provides suggestions for using this case effectively in the classroom.

    Keywords: Economics; Financial Crisis; Hungary;

    Citation:

    Di Tella, Rafael M., Matthew C. Weinzierl, and Jacob Kuipers. "Hungary: Economic Crisis and a Shift to the Right." Harvard Business School Case 711-051, March 2011. (Revised June 2016.)  View Details
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  17. Case | HBS Case Collection | July 2005 (Revised October 2019)

    The U.S. Current Account Deficit

    Laura Alfaro, Rafael Di Tella, Ingrid Vogel, Renee Kim, Sarah Jeong, Matthew Johnson and Jonathan Schlefer

    Investors and policymakers throughout the world were confronted with the risk of painful economic consequences arising from the large U.S. current account deficit. In 2007, the U.S. current account deficit was $731 billion, equivalent to 5.3% of GDP. The implications of the deficit were debated with intensity. At one extreme, it was argued that large deficits would eventually resolve themselves smoothly, even if they persisted for many more years. Former Federal Reserve Chairman Alan Greenspan was among those expecting a "benign resolution to the U.S. current account imbalance." Other analysts, such as economists at the World Bank, believed the large deficits raised the risk of a sharp and disorderly fall of the dollar and that necessary macroeconomic adjustment could be painful, for the United States as well as for the rest of the world. The Financial Times asked: "How long will foreigners be prepared to make such generous 'gifts' to the US?" In this environment, Berkshire Hathaway, run by legendary investor Warren Buffett, postulated that current account imbalances would lead to "some chaotic markets in which currency adjustments play a part" and announced to shareholders a plan to increase investment in overseas companies to protect against this risk. It remained to be seen what the short- and long-term implications of the current account deficit would ultimately yield.

    Keywords: Macroeconomics; Borrowing and Debt; Currency; Foreign Direct Investment; Business and Government Relations; United States;

    Citation:

    Alfaro, Laura, Rafael Di Tella, Ingrid Vogel, Renee Kim, Sarah Jeong, Matthew Johnson, and Jonathan Schlefer. "The U.S. Current Account Deficit." Harvard Business School Case 706-002, July 2005. (Revised October 2019.)  View Details
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  18. Background Note | HBS Case Collection | March 2011 (Revised December 2017)

    The IMF: The Washington Consensus, the Critics, and the New Challenges as China Rises

    Rafael M. Di Tella, Natalie Kindred and Monica Baraldi

    How the International Monetary Fund (IMF) defines and carries out its mandate has evolved considerably since 1944, when it was founded to serve a vital but narrow function in maintaining the global foreign exchange system and thus enabling international trade. This note gives an overview of the IMF's evolution by describing key phases in its history, including the Bretton Woods system and its collapse, the international debt crisis of the 1980s, the Washington Consensus era, and reform efforts in the 2000s.

    Keywords: History; International Finance; Globalized Economies and Regions; Trade; Financial Institutions; Macroeconomics; Financial Services Industry;

    Citation:

    Di Tella, Rafael M., Natalie Kindred, and Monica Baraldi. "The IMF: The Washington Consensus, the Critics, and the New Challenges as China Rises." Harvard Business School Background Note 711-040, March 2011. (Revised December 2017.)  View Details
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  19. Case | HBS Case Collection | March 2010 (Revised December 2010)

    The Market for Prisoners: Business, Crime and Punishment in the "American Dream"

    Rafael M. Di Tella and Laura Winig

    In 2010, Corrections Corporation of America (CCA), the largest private prison operator in the U.S., was considering expansion options. The company's largest customers, federal and state governments, were under economic pressure to reduce the incarceration rate and lower operating costs, potentially jeopardizing CCA's profits. Should CCA follow its competitor's footsteps and expand overseas? Or could it count on an ever-increasing population of U.S. prisoners to fuel continued growth?

    Keywords: For-Profit Firms; Crime and Corruption; Profit; Law Enforcement; Growth and Development Strategy; Demand and Consumers; Business and Government Relations; Competitive Strategy; Expansion; United States;

    Citation:

    Di Tella, Rafael M., and Laura Winig. The Market for Prisoners: Business, Crime and Punishment in the "American Dream". Harvard Business School Case 710-042, March 2010. (Revised December 2010.)  View Details
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  20. Case | HBS Case Collection | April 2010 (Revised October 2010)

    The International Criminal Court

    Rafael M. Di Tella and Natalie Kindred

    This Case describes a controversial 2010 decision by the International Criminal Court (ICC) and alludes to some of the broader challenges of building international institutions. The case briefly highlights certain milestones in international relations preceding the ICC's formation; provides an overview of the ICC and its activities as of March 2010; and outlines Kenya's post-election crisis in 2007–2008 and the ICC's decision to intervene. The ICC's involvement was a divisive issue: some argued it would destabilize Kenya, while others claimed it was an important step towards lasting peace. The Kenya scenario presents many aspects for consideration, including the wisdom of the ICC's involvement (given the complex historical, economic, and cultural issues underlying the 2007–2008 crisis), as well as the likelihood that Kenyan officials will cooperate with the ICC. Students can also weigh the broader implications for the ICC as it seeks to establish itself as a legitimate, fair, and just institution.

    Keywords: Crime and Corruption; Decision Choices and Conditions; International Relations; Political Elections; Courts and Trials; Organizations; Kenya;

    Citation:

    Di Tella, Rafael M., and Natalie Kindred. "The International Criminal Court." Harvard Business School Case 710-060, April 2010. (Revised October 2010.)  View Details
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  21. Case | HBS Case Collection | March 2006 (Revised April 2010)

    China: To Float or Not To Float? (A)

    Laura Alfaro, Rafael M. Di Tella and Ingrid Vogel

    On July 21, 2005 China revalued its decade-long quasi-fixed exchange rate of approximately 8.28 yuan per U.S. dollar by 2.1% to 8.11 and, at the same time, introduced a more market-based exchange rate system. Many analysts and economists were disappointed with what they considered too small a change and called for more flexibility in the U.S. dollar/yuan exchange rate. Modification to China's exchange rate regime had been eagerly anticipated and much debated in the preceding months as China's trade surplus against the United States reached record highs and as friction intensified with Europe and Japan. Also, analysts argued that the tightly managed exchange rate put a strain on China's own economy. Not only was the exchange rate expensive to sustain, but it contributed to--as well as limited China's flexibility in responding to--a potentially overheating economy. Although China's extensive controls on the movement of capital into the country helped to counteract some inflationary pressure, controls were becoming more porous as China increasingly integrated with the world economy. It remained to be seen what China would ultimately choose to do with its exchange rate regime.

    Keywords: Macroeconomics; Trade; Currency Exchange Rate; Governance Controls; Policy; Growth and Development Strategy; China;

    Citation:

    Alfaro, Laura, Rafael M. Di Tella, and Ingrid Vogel. "China: To Float or Not To Float? (A)." Harvard Business School Case 706-021, March 2006. (Revised April 2010.)  View Details
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  22. Case | HBS Case Collection | February 2004 (Revised March 2010)

    Brazil 2003: Inflation Targeting and Debt Dynamics

    Laura Alfaro, Rafael M. Di Tella and Ingrid Vogel

    In October 2002, Brazilians elected a left-wing president, Luis Inacio Lula da Silva, for the first time in that country's history. As markets faltered in response, Lula sought to reaffirm his commitment to fiscal discipline, a floating exchange rate, and inflation targeting. By August 2003, however, his attempt to change market sentiment was threatened as the country faced a looming recession. Skeptics began to worry that the new PT (Worker's Party) government would be forced to resort to printing money to meet its campaign promises. Furthermore, after Argentina's massive default on its public debt at the end of 2001, observers were questioning the sustainability of Brazil's debt situation. Lula was under intense pressure to deliver results immediately and implement measures that would help spur the economy.

    Keywords: Economy; Inflation and Deflation; Money; Borrowing and Debt; Policy; Emerging Markets; Brazil;

    Citation:

    Alfaro, Laura, Rafael M. Di Tella, and Ingrid Vogel. "Brazil 2003: Inflation Targeting and Debt Dynamics." Harvard Business School Case 704-028, February 2004. (Revised March 2010.)  View Details
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  23. Case | HBS Case Collection | March 2007 (Revised March 2010)

    Rovna Dan: The Flat Tax in Slovakia

    Laura Alfaro, Rafael M. Di Tella, Ane Damgaard Jensen and Vincent Marie Dessain

    Explores the tax policy choices made by Slovakia and the impact of reforms. Set in 2006, looks at the decision facing new Prime Minister Robert Fico as he faces the public's "reform fatigue." Traces the development of tax and fiscal policies since Slovakia's independence in 1993, focusing on the 2004 implementation of the rovna dan, or "equal tax," a drastic simplification of the tax system. A major theme is the impact of labor market and welfare reform, as well as the effective tax rates of both investors and workers. Another important theme relates to Slovakia's desire to join the EU and adopt the Euro.

    Keywords: Investment; Governing Rules, Regulations, and Reforms; Policy; Taxation; Labor; Welfare or Wellbeing; Slovakia;

    Citation:

    Alfaro, Laura, Rafael M. Di Tella, Ane Damgaard Jensen, and Vincent Marie Dessain. "Rovna Dan: The Flat Tax in Slovakia." Harvard Business School Case 707-043, March 2007. (Revised March 2010.)  View Details
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  24. Case | HBS Case Collection | February 2008 (Revised April 2009)

    Chronology of the Asian Financial Crisis

    Laura Alfaro, Rafael Di Tella and Renee Kim

    In July 1997, Thailand became the first Asian "tiger" economy to abandon its fixed exchange rate system in response to speculative attacks on its currency. Investors started to flee Asia, and the crisis rapidly spread to other countries. Central banks spent billions of dollars to try and defend their currencies, only to seek emergency bailouts from the International Monetary Fund. This case presents a chronology of events that unraveled during the Asian financial crisis from 1997 to the end of 1998.

    Keywords: Financial Crisis; Currency Exchange Rate; Central Banking; Policy; Crisis Management; Asia; Thailand;

    Citation:

    Alfaro, Laura, Rafael Di Tella, and Renee Kim. "Chronology of the Asian Financial Crisis." Harvard Business School Case 708-001, February 2008. (Revised April 2009.)  View Details
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  25. Case | HBS Case Collection | March 2008 (Revised April 2009)

    Eliot Spitzer: Pushing Wall Street to Reform

    Rawi Abdelal, Rafael Di Tella and Jonathan Schlefer

    New York State Attorney General Eliot Spitzer faced a decision about how to stop wrongdoing committed by major Wall Street firms during the Internet boom. The equities analysts of Merrill Lynch and other Wall Street firms were charged with objectively advising retail investors whether to buy or sell publicly traded stock. The analysts had rated some stock a strong buy, while at the same time disparaging it in Internet emails as "a piece of junk" or a "powder keg." Spitzer concluded that the analysts sometimes issued such buy ratings on stock of companies because of a conflict of interest: the Wall Street firms the analysts worked for were making handsome fees for underwriting the companies' stock offerings and providing other services. The usual procedure when an enforcement agency such as the Federal Securities and Exchange Commission (SEC) discovered such a situation would be to complete its investigation and negotiate a resolution privately with the financial firm. If it could not resolve the matter, the agency would formally file suit against the firm in court. This option was open to Spitzer, but the 1921 New York statue gave him an alternative. Even before filing suit in court--and while continuing to investigate the firm further--he could broadcast his findings to warn the public and brand the firm with wrongdoing. This case investigates the decision Spitzer made, and its long-term implications for U.S. financial regulation and financial industries.

    Keywords: Crime and Corruption; Decisions; Financial Institutions; Stocks; Governing Rules, Regulations, and Reforms; Laws and Statutes; Lawsuits and Litigation; Conflict of Interests; Internet; Financial Services Industry; United States;

    Citation:

    Abdelal, Rawi, Rafael Di Tella, and Jonathan Schlefer. "Eliot Spitzer: Pushing Wall Street to Reform." Harvard Business School Case 708-019, March 2008. (Revised April 2009.)  View Details
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  26. Case | HBS Case Collection | March 2006 (Revised April 2015)

    China: To Float or Not To Float? (B)- Timeline of Changes Relevant to the Chinese Renminbi

    Laura Alfaro and Rafael M. Di Tella

    On July 21, 2005 China revalued its decade-long quasi-fixed exchange rate of approximately 8.28 yuan per U.S. dollar by 2.1% to 8.11% and, at the same time, introduced a more market-based exchange rate system. Many analysts and economists were disappointed with what they considered too small a change and called for more flexibility in the U.S. dollar-yuan exchange rate. Provides a timeline of further changes relevant to the Chinese renminbi.

    Keywords: currency; exchange rate; China; Macroeconomics; Trade; Currency Exchange Rate; Governance Controls; Policy; China; United States;

    Citation:

    Alfaro, Laura, and Rafael M. Di Tella. "China: To Float or Not To Float? (B)- Timeline of Changes Relevant to the Chinese Renminbi." Harvard Business School Case 706-022, March 2006. (Revised April 2015.)  View Details
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  27. Case | HBS Case Collection | October 2008

    Financial Crisis in Asia: 1997-1998 (Abridged)

    Huw Pill, Rafael M. Di Tella and Jonathan Schlefer

    What caused the 1997-98 Asia Crisis: Asian nations' poor economic management, international financial contagion, close "crony" relations between local politicians and capitalists? This case examines how the crisis erupted in Thailand and spread in a chain of events that no one-neither Asian financial authorities nor Western economists-had foreseen. The crisis raises questions about how competently financial institutions, such as mutual funds, managed their global capital investments. It raises questions about how effective the International Monetary Fund's package of reforms was-and to what extent the IMF acted in the interest of Wall Street rather than developing nations. And the crisis raises questions about the development policies of Asian nations: Did too-close "crony" relations between politicians and owners of major banks or firms pave the way for crisis?

    Keywords: Developing Countries and Economies; Financial Crisis; Ethics; Financial Institutions; Financial Management; Governing Rules, Regulations, and Reforms; Business and Government Relations; Asia;

    Citation:

    Pill, Huw, Rafael M. Di Tella, and Jonathan Schlefer. "Financial Crisis in Asia: 1997-1998 (Abridged)." Harvard Business School Case 709-004, October 2008.  View Details
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  28. Case | HBS Case Collection | July 2008 (Revised June 2012)

    Corruption in Germany

    Rawi E. Abdelal, Rafael Di Tella and Jonathan Schlefer

    Why do managers become corrupt? Does corruption ever pay? When do friendly relations cross into bribery? How can CEOs manage and prevent outbreaks of corruption? These and other questions are raised by three short case studies of corruption in Germany: at the global engineering firm Siemens, the automaker VW, and the chemical giant BASF. While German law not only permitted overseas bribery but even made it tax deductible until 1999, it was not welcomed in some nations where Siemens did business such as the United States-or in Germany after 2000-but old practices continued. Cooperative management-labor relations, often seen as key to the post-World War II German industrial powerhouse, went sour at VW, as a top manager secured key concessions by paying for union leaders' lavish foreign travel and visits to prostitutes. After vitamin prices sagged in the late 1980s, BASF and the Swiss chemical firm Hoffmann-La Roche plotted a global cartel that lasted a decade and raised the prices of many vitamins 50 percent or more. In the end, even after record criminal fines and jail time for some executives, some observers argued, such practices were likely to recur.

    Keywords: Crime and Corruption; Law; Managerial Roles; Practice; Conflict of Interests; Germany;

    Citation:

    Abdelal, Rawi E., Rafael Di Tella, and Jonathan Schlefer. "Corruption in Germany." Harvard Business School Case 709-006, July 2008. (Revised June 2012.)  View Details
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  29. Case | HBS Case Collection | March 2007 (Revised January 2008)

    Korea: After the 1997 Financial Crisis

    Laura Alfaro, Rafael M. Di Tella and Renee Kim

    Examines what happened to Korea after the 1997 financial crisis and the implementation of the IMF-mandated reforms imposed on Korea as conditionalities to the country's emergency loan package.

    Keywords: Financial Crisis; Macroeconomics; Financing and Loans; Governing Rules, Regulations, and Reforms; Crisis Management; South Korea;

    Citation:

    Alfaro, Laura, Rafael M. Di Tella, and Renee Kim. "Korea: After the 1997 Financial Crisis." Harvard Business School Case 707-042, March 2007. (Revised January 2008.)  View Details
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  30. Case | HBS Case Collection | November 2006 (Revised July 2007)

    CNN and the Cable News Wars

    Bharat N. Anand, Rafael M. Di Tella and Dennis A. Yao

    Set in 1996, when ABC, NBC and Microsoft, and Fox all announced that they will challenge Cable News Network's near monopoly position in the 24-hour cable news channel market. The focus is on the interaction of the strategies likely to be adopted by each player given their relative resources, leadership, and interests.

    Keywords: Leadership; Resource Allocation; Monopoly; Rank and Position; Reputation; Adoption; Competition;

    Citation:

    Anand, Bharat N., Rafael M. Di Tella, and Dennis A. Yao. "CNN and the Cable News Wars." Harvard Business School Case 707-491, November 2006. (Revised July 2007.)  View Details
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  31. Case | HBS Case Collection | March 2005 (Revised July 2007)

    Capital Controls in Chile in the 1990s (A)

    Laura Alfaro, Rafael M. Di Tella and Ingrid Vogel

    In 1991, Chile adopted a framework of capital controls focused on reducing the massive flows of foreign investment coming into the country as international interest rates remained low. Capital inflows threatened the Central Bank's ability to manage the exchange rate within a crawling band, which aimed eventually to lower Chile's rate of inflation to international levels. Until the Asian financial crisis of 1997 and the Russian debt crisis of August 1998, the Chilean economy performed spectacularly under, or perhaps in spite of, these controls. In the aftermath of the Asian and Russian crises, Chile's economy began to suffer through both trade and financial channels. Chile's current account deteriorated not only because Chile relied on Asia as a market for one-third of its exports, but also as the price of cooper, Chile's largest export product, plummeted in the face of dwindling Asian demand. Financial flows to Chile, like to emerging markets in general, fell dramatically as investors panicked. By the end of 1999, Chile had experienced Latin America's most severe "sudden stop" of external capital flows. In this new economic environment, Chile was forced to reevaluate its system of capital controls. Many observers in the private sector blamed the controls for unnecessarily adding to the strain and demanded the controls be dismantled completely. Meanwhile, Chile's Central Bank continued to defend the controls and argued that they had helped insulate the country for worse contagion.

    Keywords: Developing Countries and Economies; Economic Growth; Financial Crisis; Capital; Governance Controls; Business and Government Relations; Chile;

    Citation:

    Alfaro, Laura, Rafael M. Di Tella, and Ingrid Vogel. "Capital Controls in Chile in the 1990s (A)." Harvard Business School Case 705-031, March 2005. (Revised July 2007.)  View Details
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  32. Case | HBS Case Collection | October 2004 (Revised February 2007)

    Spain: Straddling the Atlantic

    Rafael M. Di Tella and Ingrid Vogel

    Provides a broad overview of economic and political developments in Spain from the 1940s to the present day. Examines the emergence of Spain from the Franco dictatorship and its convergence into a vibrant democracy, as reflected in the surprising election results of 2004. Also describes the economic transformation of Spain and permits discussion of the interrelationships between the economic and political dynamics. Highlights the role the European Union (EU) played as an inspirational goal and institutional constraint on how Spain developed both economically and politically. Discuses in greater detail the Spanish labor market and the evolution of unemployment levels in Spain. Also looks at the role of terrorism in a society such as Spain's, with reference to both the Basque separatist terrorism of ETA and the international terrorism associated with the Atocha station bombings in 2004.

    Keywords: Economics; Government and Politics; Spain; European Union;

    Citation:

    Di Tella, Rafael M., and Ingrid Vogel. "Spain: Straddling the Atlantic." Harvard Business School Case 705-006, October 2004. (Revised February 2007.)  View Details
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  33. Case | HBS Case Collection | February 2007

    Bolivia and Evo Morales

    Rafael M. Di Tella, Laura Alfaro and Ezequiel Reficco

    Keywords: Development Economics; Developing Countries and Economies; Economy; Policy; Bolivia;

    Citation:

    Di Tella, Rafael M., Laura Alfaro, and Ezequiel Reficco. "Bolivia and Evo Morales." Harvard Business School Case 707-041, February 2007.  View Details
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  34. Case | HBS Case Collection | December 2006 (Revised January 2007)

    Infosys in India: Building a Software Giant in a Corrupt Environment

    Rawi E. Abdelal, Rafael M. Di Tella and Prabakar (PK) Kothandaraman

    Shortly after Infosys was founded in 1981, its managers faced a major turning point when they made a decision to operate without giving in to the petty corruption rife in the Indian economy. Within just a few years, that decision had truly defined the company. Over the next 25 years, Infosys managers went to extraordinary lengths to avoid even the most modest of practices that they considered inappropriate. Explores the practices and methods that Infosys adopted instead, considers their costs, benefits, and generalizability, and contextualizes the problem within Indian political and economic institutions that continue to evolve.

    Keywords: History; Management Style; Moral Sensibility; Policy; Business and Government Relations; Decisions; Business Growth and Maturation; Situation or Environment; Crime and Corruption; Business Strategy; Information Technology Industry; Computer Industry; India;

    Citation:

    Abdelal, Rawi E., Rafael M. Di Tella, and Prabakar (PK) Kothandaraman. "Infosys in India: Building a Software Giant in a Corrupt Environment." Harvard Business School Case 707-030, December 2006. (Revised January 2007.)  View Details
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  35. Case | HBS Case Collection | March 2006 (Revised November 2006)

    China: To Float or Not To Float? (E)- ABB Investment in China

    Laura Alfaro, Rafael M. Di Tella and Ingrid Vogel

    In July 2005, China revalued its currency by 2.1% and adjusted its exchange rate regime toward a more market-based system. ABB, a global power and automation technologies company based out of Switzerland with operations in China, was among those companies confronted with the challenge of addressing the revaluation of the yuan and the possibility of future appreciation. Provides background on ABB's activities in China as well as incentives provided by Chinese officials for multinational corporations to move inland.

    Keywords: Currency Exchange Rate; Investment; Multinational Firms and Management; International Relations; Problems and Challenges; Value Creation; China; Switzerland;

    Citation:

    Alfaro, Laura, Rafael M. Di Tella, and Ingrid Vogel. "China: To Float or Not To Float? (E)- ABB Investment in China." Harvard Business School Case 706-035, March 2006. (Revised November 2006.)  View Details
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  36. Case | HBS Case Collection | May 2006 (Revised November 2006)

    China: To Float or Not To Float? (F)- Alcatel and Strong Chinese Competition

    Laura Alfaro, Rafael M. Di Tella and Ingrid Vogel

    The Chinese operations of Alcatel, a global communications solution provider based in France, were faced with strong local competition and a difficult market. It remained unclear how Alcatel would be able to recover growth in the Chinese market. Initiatives were underway to increase focus on services over equipment, to increase Chinese research and development presence, and to merge with U.S. competitor Lucent.

    Keywords: Currency Exchange Rate; International Relations; Growth and Development Strategy; Research and Development; Competitive Strategy; Horizontal Integration; Communications Industry; China; France; United States;

    Citation:

    Alfaro, Laura, Rafael M. Di Tella, and Ingrid Vogel. "China: To Float or Not To Float? (F)- Alcatel and Strong Chinese Competition." Harvard Business School Case 706-036, May 2006. (Revised November 2006.)  View Details
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  37. Case | HBS Case Collection | March 2006 (Revised November 2006)

    China: To Float or Not To Float? (D)- Bank of America's Strategic Investment in China Construction Bank

    Laura Alfaro, Rafael M. Di Tella and Ingrid Vogel

    With its $3 billion investment in Chinese state bank China Construction Bank, Bank of America--the second U.S. bank behind Citigroup in terms of assets and market capitalization--was one of several foreign banks directly participating in China's banking sector reform. Banking sector reform was considered by some analysts to be an important complement to capital account liberalization and further changes to China's exchange rate regime.

    Keywords: Currency Exchange Rate; Banks and Banking; Foreign Direct Investment; International Relations; Banking Industry; China; United States;

    Citation:

    Alfaro, Laura, Rafael M. Di Tella, and Ingrid Vogel. "China: To Float or Not To Float? (D)- Bank of America's Strategic Investment in China Construction Bank." Harvard Business School Case 706-031, March 2006. (Revised November 2006.)  View Details
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  38. Case | HBS Case Collection | March 2006 (Revised November 2006)

    China: To Float or Not To Float? (C)- Esquel Group and the Chinese Renminbi

    Laura Alfaro, Rafael M. Di Tella and Ingrid Vogel

    In July 2005, China revalued its currency by 2.1% and adjusted its exchange rate regime toward a more market-based system. Esquel Group, a family-run, privately held textiles firm specializing in high-quality cotton shirts with its most significant manufacturing base located in China, was among those companies confronted with the challenge of addressing the revaluation of the yuan and the possibility of future appreciation. Provides a brief overview of China's textile industry and background on Esquel Group.

    Keywords: Family Business; Currency Exchange Rate; Private Ownership; Problems and Challenges; Value Creation; China;

    Citation:

    Alfaro, Laura, Rafael M. Di Tella, and Ingrid Vogel. "China: To Float or Not To Float? (C)- Esquel Group and the Chinese Renminbi." Harvard Business School Case 706-023, March 2006. (Revised November 2006.)  View Details
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  39. Case | HBS Case Collection | November 2002 (Revised March 2006)

    Inequality and the "American Model"

    Rafael M. Di Tella and Ingrid Vogel

    Official data that suggest economic inequality has been mounting in the United States on various dimensions since 1979. Many causes of such inequality have been postulated: technological change, globalization, demographic factors, and changes in public policy (notably changes in taxation during the Reagan presidency). Whether rising inequality is even a cause for concern is an open question. Some dimensions of inequality may be of concern, whereas other dimensions may be viewed as less problematic. To the extent that rising inequality is seen as a social problem that needs to be addressed, various policy proposals have been advocated.

    Keywords: Equality and Inequality; Wealth and Poverty; Corporate Governance; Social Issues; Government Administration; United States;

    Citation:

    Di Tella, Rafael M., and Ingrid Vogel. Inequality and the "American Model". Harvard Business School Case 703-025, November 2002. (Revised March 2006.)  View Details
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  40. Supplement | HBS Case Collection | August 2005

    The U.S. Current Account Deficit (CW)

    Laura Alfaro, Rafael M. Di Tella and Ingrid Vogel

    Keywords: Sovereign Finance; United States;

    Citation:

    Alfaro, Laura, Rafael M. Di Tella, and Ingrid Vogel. "The U.S. Current Account Deficit (CW)." Harvard Business School Spreadsheet Supplement 706-701, August 2005.  View Details
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  41. Case | HBS Case Collection | March 2005 (Revised June 2005)

    Capital Controls in Chile in the 1990s (B)

    Laura Alfaro, Rafael M. Di Tella and Ingrid Vogel

    Supplements the (A) case.

    Keywords: Governance Controls; Financial Crisis; Foreign Direct Investment; Currency Exchange Rate; Inflation and Deflation; Demand and Consumers; Interest Rates; Capital; System; Central Banking; Chile;

    Citation:

    Alfaro, Laura, Rafael M. Di Tella, and Ingrid Vogel. "Capital Controls in Chile in the 1990s (B)." Harvard Business School Case 705-032, March 2005. (Revised June 2005.)  View Details
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  42. Background Note | HBS Case Collection | May 2004 (Revised June 2005)

    Exchange Rate Regimes

    Rafael M. Di Tella and Ingrid Vogel

    There are many options for a country in the management of monetary policy. At the most basic level is the decision of whether to adopt a fixed or a floating exchange rate. Introduces the economics behind exchange rates and the debate between fixed vs. floating regimes.

    Keywords: Currency Exchange Rate; Policy; Macroeconomics; Country;

    Citation:

    Di Tella, Rafael M., and Ingrid Vogel. "Exchange Rate Regimes." Harvard Business School Background Note 704-038, May 2004. (Revised June 2005.)  View Details
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  43. Case | HBS Case Collection | December 2001 (Revised March 2004)

    Argentine Paradox: The, Economic Growth and the Populist Tradition

    Rafael M. Di Tella and Ingrid Vogel

    Describes the political and economic development in Argentina from 1900 to 1989, with a focus on the role of Peron and populism. A rewritten version of an earlier case.

    Keywords: History; Development Economics; Economic Growth; Government Administration; Argentina;

    Citation:

    Di Tella, Rafael M., and Ingrid Vogel. "Argentine Paradox: The, Economic Growth and the Populist Tradition." Harvard Business School Case 702-001, December 2001. (Revised March 2004.)  View Details
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  44. Case | HBS Case Collection | December 2001 (Revised February 2004)

    Argentina's Convertibility Plan

    Rafael M. Di Tella and Ingrid Vogel

    Describes the political and economic development in Argentina from 1989 to 1995, with a focus on the role of the currency board. Culminates in Argentine policy makers (Menem in particular) contemplating how to respond to the tequila crisis in the middle of 1995. Focuses on the tradeoff between a fixed exchange rate to maintain price stability and the required high interest rates that impact financial stability. A rewritten version of an earlier case.

    Keywords: Currency Exchange Rate; Government and Politics; Interest Rates; Balance and Stability; Developing Countries and Economies; Financial Crisis; Crisis Management; Policy; Currency; Macroeconomics; Argentina;

    Citation:

    Di Tella, Rafael M., and Ingrid Vogel. "Argentina's Convertibility Plan." Harvard Business School Case 702-002, December 2001. (Revised February 2004.)  View Details
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  45. Case | HBS Case Collection | October 2003 (Revised January 2004)

    The 2001 Crisis in Argentina: An IMF-Sponsored Default? (A)

    Rafael M. Di Tella and Ingrid Vogel

    At the end of 2001, Argentina's economy and society both appeared on the verge of collapse. Furious about controls imposed on the convertibility of their bank deposits into cash (the "corralito") and huge proposed government spending cuts amidst high unemployment and deteriorating social services, Argentines from all economic backgrounds took to the streets in protest. In violent rioting, stores were looted, buildings burned, and more than 22 people killed. The entire government was forced to resign. A succession of increasingly ineffectual presidents shuffled through the presidential palace, each seemingly more powerless to confront the crisis than the last. Meanwhile, the country's economic situation continued to deteriorate, and Argentina soon defaulted on its $141 billion in foreign debt outstanding in the largest sovereign default in history. On January 2, 2002, Eduardo Duhalde was selected interim president by Argentina's Congress—and would serve as Argentina's fifth president in two weeks. At the helm of Argentina's flailing economy, he had a number of important decisions to make. Among these were what to do with Argentina's decade-long peg to the dollar under the Convertibility Plan.

    Keywords: Financial Crisis; Economic Slowdown and Stagnation; Banks and Banking; Problems and Challenges; Decision Choices and Conditions; Currency Exchange Rate; Economy; Government Administration; Crime and Corruption; Argentina;

    Citation:

    Di Tella, Rafael M., and Ingrid Vogel. "The 2001 Crisis in Argentina: An IMF-Sponsored Default? (A)." Harvard Business School Case 704-004, October 2003. (Revised January 2004.)  View Details
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  46. Case | HBS Case Collection | October 2003 (Revised January 2004)

    The 2001 Crisis in Argentina: An IMF-Sponsored Default? (B)

    Rafael M. Di Tella and Ingrid Vogel

    Supplements the (A) case.

    Keywords: Argentina;

    Citation:

    Di Tella, Rafael M., and Ingrid Vogel. "The 2001 Crisis in Argentina: An IMF-Sponsored Default? (B)." Harvard Business School Case 704-021, October 2003. (Revised January 2004.)  View Details
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  47. Case | HBS Case Collection | June 2002 (Revised March 2003)

    Bolivia: Globalization, Sovereignty, or Democracy?

    Rafael M. Di Tella, Huw Pill, Miguel Lopez de Silanes Gomez, Cinthia Fernholz Violand and Ingrid Vogel

    Describes the economic stabilization program implemented by the Bolivian government in 1985 to 1986 and its impact on the development process in Bolivia.

    Keywords: History; Programs; Development Economics; Inflation and Deflation; Globalization; Government and Politics; Bolivia;

    Citation:

    Di Tella, Rafael M., Huw Pill, Miguel Lopez de Silanes Gomez, Cinthia Fernholz Violand, and Ingrid Vogel. "Bolivia: Globalization, Sovereignty, or Democracy?" Harvard Business School Case 702-086, June 2002. (Revised March 2003.)  View Details
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  48. Case | HBS Case Collection | February 2002 (Revised February 2003)

    Argentina's Financial System: The Case of Banco de Galicia

    Rafael M. Di Tella, Tarun Khanna, Huw Pill, Alexandra de Royere and Ingrid Vogel

    Describes the development of Argentina's financial system after the "Tequila Crisis" that came about as a result of the speculative attack on the Mexican peso's peg to the U.S. dollar in December 1994. Although Argentina's banking system was strengthened overall due to changes implemented to address the crisis, most of the country's domestic private banks were either taken over by foreign banks or failed. Focuses on how in the year 2000, in an effort to remain Argentine owned, the last remaining large domestic private bank adopts a share offer considered by some--particularly a vocal member of one of the bank's controlling families--to be unfair to minority shareholders.

    Keywords: Finance; Emerging Markets; Macroeconomics; Business Strategy; Banks and Banking; Financial Crisis; Family Business; Acquisition; Banking Industry; Argentina;

    Citation:

    Di Tella, Rafael M., Tarun Khanna, Huw Pill, Alexandra de Royere, and Ingrid Vogel. "Argentina's Financial System: The Case of Banco de Galicia." Harvard Business School Case 702-033, February 2002. (Revised February 2003.)  View Details
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  49. Case | HBS Case Collection | February 2002

    Strategy of the Firm Under Regulatory Review: The Case of Chilectra

    Rafael M. Di Tella and Alexander Dyck

    Discusses the largest electric distribution company in Chile and one of the five largest private Chilean companies. Introduces the exercise of operating control in order to improve the profitability of the investments, privatization, and international expansions.

    Keywords: Corporate Governance; Corporate Accountability; Growth and Development Strategy; Privatization; Emerging Markets; Competitive Strategy; Expansion; Global Strategy; Governance Compliance; Utilities Industry; Chile;

    Citation:

    Di Tella, Rafael M., and Alexander Dyck. "Strategy of the Firm Under Regulatory Review: The Case of Chilectra." Harvard Business School Case 702-025, February 2002.  View Details
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  50. Case | HBS Case Collection | March 2000 (Revised April 2001)

    Menem and the Populist Tradition in Argentina

    Rafael M. Di Tella and Eliseo Neuman

    Argentina has flourished under a fixed exchange rate system, yet there are large income and employment fluctuations. The social cost of unemployment is threatening the viability of the economic model. Building a welfare state is one alternative, but this may be a return to the populist policies of the past.

    Keywords: History; Governance; Job Cuts and Outsourcing; Employment; Currency Exchange Rate; Welfare or Wellbeing; Government Administration; Government and Politics; Argentina;

    Citation:

    Di Tella, Rafael M., and Eliseo Neuman. "Menem and the Populist Tradition in Argentina." Harvard Business School Case 700-061, March 2000. (Revised April 2001.)  View Details
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Other Publications and Materials

  1. Other Unpublished Work | 2018

    Trump's Populism: What Business Leaders Need To Understand

    Rafael Di Tella

    In the 2016 United States presidential election, candidates from both major political parties used anti-establishment messaging to appeal to Americans, a theme that had been on the sidelines of US political discourse for decades. Donald Trump, in particular, played into the rising anti-establishment sentiment, embracing a populist platform and emphasizing his position as a Washington outsider. Why did his message resonate with voters? Rafael Di Tella discusses how many Americans felt betrayed by the educated “elite” view on globalization, and looked to Trump as a president who would put American workers and values first.

    Keywords: globalization; Government and Politics; social issues; populism; Globalization; Public Opinion; Social Issues; Government and Politics; Demographics; United States;

    Citation:

    Di Tella, Rafael. "Trump's Populism: What Business Leaders Need To Understand." HBS Working Knowledge, March 2018.  View Details
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